Pension Cashflow Retirement Planner - Key Info?

jamesd

Seems quite cautious given that Guyton-Klinger at 5% of the combined balance would start on £46k even  before allowing for state pensions.

GSP

jamesd said:

Seems quite cautious given that Guyton-Klinger at 5% of the combined balance would start on £46k even  before allowing for state pensions.

Thanks jamesd. My IFA also combined our balances in his retirement planner to me. That’s the thing, where do you draw the line between caution and spending more. My thinking is leaving the wife’s pension alone as the safety measure.
Not sure if it’s possible, or if you want to. Could you please jot down a few years figures how you think I could drawdown. Be interesting to see where I am compared to your numbers after a few years projections. Thanks

GSP

I think my main ‘problem’ will be paying tax once I have used my allowance.
If I withdraw £40k, I would use our personal allowance, so £13,750 combined. That leaves £26,250 taxable which at 20% is £5,250 in tax which in real terms reduces my withdrawal from £40,000 to £34,750.
Quite a difference but I suppose one I will have to swallow and help Rishi out with. I wonder what the next budget will bring for private pensions with so much money to claw back.

GSP

jamesd said:

Seems quite cautious given that Guyton-Klinger at 5% of the combined balance would start on £46k even  before allowing for state pensions.

That’s the thing above though, my tax free money won’t last forever and I’ll get hit with more tax the more I take out. Nature of the beast I suppose!

garmeg

GSP said:

I think my main ‘problem’ will be paying tax once I have used my allowance.
If I withdraw £40k, I would use our personal allowance, so £13,750 combined. That leaves £26,250 taxable which at 20% is £5,250 in tax which in real terms reduces my withdrawal from £40,000 to £34,750.
Quite a difference but I suppose one I will have to swallow and help Rishi out with. I wonder what the next budget will bring for private pensions with so much money to claw back.

If you want £40k net you need to withdraw (£40,000 - £13,750) / 0.8 + £13,750 = £46,562.50

You got tax relief on the way in so should pay tax on the way out.

It's still a good deal due to the PCLS.

GSP

garmeg said:

GSP said:

I think my main ‘problem’ will be paying tax once I have used my allowance.
If I withdraw £40k, I would use our personal allowance, so £13,750 combined. That leaves £26,250 taxable which at 20% is £5,250 in tax which in real terms reduces my withdrawal from £40,000 to £34,750.
Quite a difference but I suppose one I will have to swallow and help Rishi out with. I wonder what the next budget will bring for private pensions with so much money to claw back.

If you want £40k net you need to withdraw (£40,000 - £13,750) / 0.8 + £13,750 = £46,562.50

You got tax relief on the way in so should pay tax on the way out.

It's still a good deal due to the PCLS.

That’s the figure jamesd mentioned above using Guyton-Klinger methodology.

GSP

garmeg said:

GSP said:

I think my main ‘problem’ will be paying tax once I have used my allowance.
If I withdraw £40k, I would use our personal allowance, so £13,750 combined. That leaves £26,250 taxable which at 20% is £5,250 in tax which in real terms reduces my withdrawal from £40,000 to £34,750.
Quite a difference but I suppose one I will have to swallow and help Rishi out with. I wonder what the next budget will bring for private pensions with so much money to claw back.

If you want £40k net you need to withdraw (£40,000 - £13,750) / 0.8 + £13,750 = £46,562.50

You got tax relief on the way in so should pay tax on the way out.

It's still a good deal due to the PCLS.

I wasn’t going to use my wife’s pension and just let it grow, but had a thought I could use her personal tax allowance to the max and reduce my withdrawal.

coyrls

jamesd said:

Seems quite cautious given that Guyton-Klinger at 5% of the combined balance would start on £46k even  before allowing for state pensions.

But he's assuming a constant withdrawal rate in his model.

jamesd

coyrls said:

jamesd said:

Seems quite cautious given that Guyton-Klinger at 5% of the combined balance would start on £46k even  before allowing for state pensions.

But he's assuming a constant withdrawal rate in his model.

Yes, constant inflation-adjusted for each period so not G-K variable. But "by age 75. At that time, I have reduced withdrawals to £30k". Within each period 4% rule is a closer comparator to his model but G-K seems to better meet his objectives.

jamesd

GSP said: Could you please jot down a few years figures how you think I could drawdown. Be interesting to see where I am compared to your numbers after a few years projections. Thanks

To get my answer do this:

1. Combine your two pots
2. Subtract £9,000 for state pension substitution for you from now and her from work stop, until state pension age
3. Subtract £9,000 for each of you for five years of state pension deferring, raising the five years delayed state pension by 29% each
4. Use Guyton-Klinger at 5% or 4% rule at 3.2% on the remaining pot
5. Using a modelling tool shift your age-related spending cuts to provide earlier spending. More crudely, if you anticipate a 5k a year cut from age 70 of a plan lasting until age 95 and are 55 now, 25 years of 5k reductions to be spread over 15 years is an increase of 5k * 25 / 15 = 8.3k more than the step 4 calculation in the early years.

Just work through this with both G-K and 4% rule and tell us the workings and raw answers, then plug the numbers into your spreadsheet and see how that goes.