Dual Drawdown Fund Dilemma

GSP

BritishInvestor said:

GSP said:

BritishInvestor said:

GSP said:

ukdw said:

GSP - In your situation the starting point for my drawdown strategy would be based on a spend savings/isa's first, pension drawdown tax efficiency - LTA, IHT, tax relief and income tax based approach.

I would imagine the key driver for drawdown level on your £750k pot would be LTA up to age 75, so I would probably aim to drawdown growth only - which if for example you achieve an average of 5% would mean about £37.5k gross a year on average.

After your SP age your income would increase by at least another £10k up to close to £50k gross. If you do get the odd years growth that would take your total income above the basic rate allowance (£50k currently) you may wish to limit drawdowns to keep you within that allowance for a few years incase you get a few years of negative growth later to take up the slack.   

Edit: For any years of negative growth I would probably still drawdown up to the tax free allowance level (or more if saving depleted).

After age 75 then IHT may well become more of a driver for your pot - so you may well consider reducing withdrawals down closer to the tax free allowance minus SP at that stage if you have sufficient funds left outside of the pension to support your lifestyles.

For your wife's £175k I would firstly aim to contribute £3,600 a year until age 75 for the £180-£720 per year tax relief benefit.  

Edited: 

It might be worth giving your wife back her married allowance once she is able to start drawdown. I would then aim to withdraw up to the tax free allowance (currently £12,500) level which may well be able to be sustained indefinitely once she takes into account the 20+ extra £3,600 gross contributions, growth and reduced drawdowns once she reaches SP age.  

I would base your wife crystalisations/tax free lump sum withdrawals on keeping within the tax free lump sum recycling rules.

If your savings ever start to run out using the above approaches I would probably focus additional drawdowns on your wives pension pot first - as she should have plenty of 20% tax band available.

Thanks very much for this. What this is crying out for is a plan, a strategy to work towards, not just being told not to withdraw too much. Should my IFA be offering all sorts of options, advice, a plan of sorts because while others seem very comfortable about investing, to me this is a minefield.
When my wife’s fund becomes available in 2022, it offers another dynamic and opportunity with another personal tax allowance quota. My IFA produced a combined planner for both of us, but I am sure we need two planners as both are independent funds, and may be drawdown quite differently.
I think what you have written above is more than what my IFA has offered in over 3 years.

"Should my IFA be offering all sorts of options, advice, a plan of sorts because while others seem very comfortable about investing, to me this is a minefield."
What else would you be paying him for?
"My IFA produced a combined planner for both of us, but I am sure we need two planners as both are independent funds, and may be drawdown quite differently."
It should be one financial plan, optimised for both of the funds.

Yes agree it should be one plan, bringing both funds together. It was just the running of these funds showing what’s going on in two separate planners as I can see the amounts/the % withdrawals to be quite different perhaps?

Once the financial plan is created it is trivial to report on the various withdrawals, either on an individual year or over the whole retirement period.

Thanks. And for the view looking forward on your plans. I can imagine no two plans look quite the same with different expectations and aspirations. Behind the scenes and summaries however, many probably have an excel spreadsheet working away. I think as well as your future plans, you need to keep your history close by to see where you have come from, are on track etc. I suppose many plans evolve over time, depending where you are on your journey.

BritishInvestor

GSP said:

BritishInvestor said:

GSP said:

BritishInvestor said:

GSP said:

ukdw said:

GSP - In your situation the starting point for my drawdown strategy would be based on a spend savings/isa's first, pension drawdown tax efficiency - LTA, IHT, tax relief and income tax based approach.

I would imagine the key driver for drawdown level on your £750k pot would be LTA up to age 75, so I would probably aim to drawdown growth only - which if for example you achieve an average of 5% would mean about £37.5k gross a year on average.

After your SP age your income would increase by at least another £10k up to close to £50k gross. If you do get the odd years growth that would take your total income above the basic rate allowance (£50k currently) you may wish to limit drawdowns to keep you within that allowance for a few years incase you get a few years of negative growth later to take up the slack.   

Edit: For any years of negative growth I would probably still drawdown up to the tax free allowance level (or more if saving depleted).

After age 75 then IHT may well become more of a driver for your pot - so you may well consider reducing withdrawals down closer to the tax free allowance minus SP at that stage if you have sufficient funds left outside of the pension to support your lifestyles.

For your wife's £175k I would firstly aim to contribute £3,600 a year until age 75 for the £180-£720 per year tax relief benefit.  

Edited: 

It might be worth giving your wife back her married allowance once she is able to start drawdown. I would then aim to withdraw up to the tax free allowance (currently £12,500) level which may well be able to be sustained indefinitely once she takes into account the 20+ extra £3,600 gross contributions, growth and reduced drawdowns once she reaches SP age.  

I would base your wife crystalisations/tax free lump sum withdrawals on keeping within the tax free lump sum recycling rules.

If your savings ever start to run out using the above approaches I would probably focus additional drawdowns on your wives pension pot first - as she should have plenty of 20% tax band available.

Thanks very much for this. What this is crying out for is a plan, a strategy to work towards, not just being told not to withdraw too much. Should my IFA be offering all sorts of options, advice, a plan of sorts because while others seem very comfortable about investing, to me this is a minefield.
When my wife’s fund becomes available in 2022, it offers another dynamic and opportunity with another personal tax allowance quota. My IFA produced a combined planner for both of us, but I am sure we need two planners as both are independent funds, and may be drawdown quite differently.
I think what you have written above is more than what my IFA has offered in over 3 years.

"Should my IFA be offering all sorts of options, advice, a plan of sorts because while others seem very comfortable about investing, to me this is a minefield."
What else would you be paying him for?
"My IFA produced a combined planner for both of us, but I am sure we need two planners as both are independent funds, and may be drawdown quite differently."
It should be one financial plan, optimised for both of the funds.

Yes agree it should be one plan, bringing both funds together. It was just the running of these funds showing what’s going on in two separate planners as I can see the amounts/the % withdrawals to be quite different perhaps?

Once the financial plan is created it is trivial to report on the various withdrawals, either on an individual year or over the whole retirement period.

Thanks. And for the view looking forward on your plans. I can imagine no two plans look quite the same with different expectations and aspirations. Behind the scenes and summaries however, many probably have an excel spreadsheet working away. I think as well as your future plans, you need to keep your history close by to see where you have come from, are on track etc. I suppose many plans evolve over time, depending where you are on your journey.

" I can imagine no two plans look quite the same with different expectations and aspirations"
They tend to be unique in their own way.
"Behind the scenes and summaries however, many probably have an excel spreadsheet working away. "
I think Excel is fine for DIY use as long as you are aware of the limitations.

ukdw

GSP said:

ukdw said:

GSP - In your situation the starting point for my drawdown strategy would be based on a spend savings/isa's first, pension drawdown tax efficiency - LTA, IHT, tax relief and income tax based approach.

I would imagine the key driver for drawdown level on your £750k pot would be LTA up to age 75, so I would probably aim to drawdown growth only - which if for example you achieve an average of 5% would mean about £37.5k gross a year on average.

After your SP age your income would increase by at least another £10k up to close to £50k gross. If you do get the odd years growth that would take your total income above the basic rate allowance (£50k currently) you may wish to limit drawdowns to keep you within that allowance for a few years incase you get a few years of negative growth later to take up the slack.   

Edit: For any years of negative growth I would probably still drawdown up to the tax free allowance level (or more if saving depleted).

After age 75 then IHT may well become more of a driver for your pot - so you may well consider reducing withdrawals down closer to the tax free allowance minus SP at that stage if you have sufficient funds left outside of the pension to support your lifestyles.

For your wife's £175k I would firstly aim to contribute £3,600 a year until age 75 for the £180-£720 per year tax relief benefit.  

Edited: 

It might be worth giving your wife back her married allowance once she is able to start drawdown. I would then aim to withdraw up to the tax free allowance (currently £12,500) level which may well be able to be sustained indefinitely once she takes into account the 20+ extra £3,600 gross contributions, growth and reduced drawdowns once she reaches SP age.  

I would base your wife crystalisations/tax free lump sum withdrawals on keeping within the tax free lump sum recycling rules.

If your savings ever start to run out using the above approaches I would probably focus additional drawdowns on your wives pension pot first - as she should have plenty of 20% tax band available.

Thanks very much for this. What this is crying out for is a plan, a strategy to work towards, not just being told not to withdraw too much. Should my IFA be offering all sorts of options, advice, a plan of sorts because while others seem very comfortable about investing, to me this is a minefield.
When my wife’s fund becomes available in 2022, it offers another dynamic and opportunity with another personal tax allowance quota. My IFA produced a combined planner for both of us, but I am sure we need two planners as both are independent funds, and may be drawdown quite differently.
I think what you have written above is more than what my IFA has offered in over 3 years.

Thanks, personally I would stick to a single plan across both of you if you can, with combined spending (mandatory and discretionary), all pensions (including state pension), all assets, savings and investments.   Probably with one row per year, with separate columns each item above, plus income tax, growth, interest, inflation etc, plus overall estate totals etc. (for IHT planning).

One small refinement to my earlier drawdown suggestions is that I would probably try to not let your wife's pension drop below about 10 x the Tax Free Allowance minus state pension (about £35k in today's terms) - as this would hopefully allow her to continue to make full use of her tax free allowance once she stops being able to contribute at age 75.

GSP

ukdw said:

GSP said:

ukdw said:

GSP - In your situation the starting point for my drawdown strategy would be based on a spend savings/isa's first, pension drawdown tax efficiency - LTA, IHT, tax relief and income tax based approach.

I would imagine the key driver for drawdown level on your £750k pot would be LTA up to age 75, so I would probably aim to drawdown growth only - which if for example you achieve an average of 5% would mean about £37.5k gross a year on average.

After your SP age your income would increase by at least another £10k up to close to £50k gross. If you do get the odd years growth that would take your total income above the basic rate allowance (£50k currently) you may wish to limit drawdowns to keep you within that allowance for a few years incase you get a few years of negative growth later to take up the slack.   

Edit: For any years of negative growth I would probably still drawdown up to the tax free allowance level (or more if saving depleted).

After age 75 then IHT may well become more of a driver for your pot - so you may well consider reducing withdrawals down closer to the tax free allowance minus SP at that stage if you have sufficient funds left outside of the pension to support your lifestyles.

For your wife's £175k I would firstly aim to contribute £3,600 a year until age 75 for the £180-£720 per year tax relief benefit.  

Edited: 

It might be worth giving your wife back her married allowance once she is able to start drawdown. I would then aim to withdraw up to the tax free allowance (currently £12,500) level which may well be able to be sustained indefinitely once she takes into account the 20+ extra £3,600 gross contributions, growth and reduced drawdowns once she reaches SP age.  

I would base your wife crystalisations/tax free lump sum withdrawals on keeping within the tax free lump sum recycling rules.

If your savings ever start to run out using the above approaches I would probably focus additional drawdowns on your wives pension pot first - as she should have plenty of 20% tax band available.

Thanks very much for this. What this is crying out for is a plan, a strategy to work towards, not just being told not to withdraw too much. Should my IFA be offering all sorts of options, advice, a plan of sorts because while others seem very comfortable about investing, to me this is a minefield.
When my wife’s fund becomes available in 2022, it offers another dynamic and opportunity with another personal tax allowance quota. My IFA produced a combined planner for both of us, but I am sure we need two planners as both are independent funds, and may be drawdown quite differently.
I think what you have written above is more than what my IFA has offered in over 3 years.

Thanks, personally I would stick to a single plan across both of you if you can, with combined spending (mandatory and discretionary), all pensions (including state pension), all assets, savings and investments.   Probably with one row per year, with separate columns each item above, plus income tax, growth, interest, inflation etc, plus overall estate totals etc. (for IHT planning).

One small refinement to my earlier drawdown suggestions is that I would probably try to not let your wife's pension drop below about 10 x the Tax Free Allowance minus state pension (about £35k in today's terms) - as this would hopefully allow her to continue to make full use of her tax free allowance once she stops being able to contribute at age 75.

Thank you. Phew, quite a few more metrics there than I envisaged. Trying to manage income tax after our tax free element runs out will be a challenge. Inflation, for spending where bills, shopping, insurance, running a car etc attracts inflation, I calculate this affects less than half of our withdrawals. Yes, inflation will grow, but expect it should not exceed withdrawals. By this time we only be spending on bills, so this should offset one another.
I can’t get my head around inheritances with the great unknown when these may happen. In all though, I really need to brush up on tax, LTA etc, so I am aware of it, trying to build a strategy now so this doesn’t become too much of a problem later on.

Thrugelmir

GSP said:

BritishInvestor said:

GSP said:

BritishInvestor said:

GSP said:

ukdw said:

GSP - In your situation the starting point for my drawdown strategy would be based on a spend savings/isa's first, pension drawdown tax efficiency - LTA, IHT, tax relief and income tax based approach.

I would imagine the key driver for drawdown level on your £750k pot would be LTA up to age 75, so I would probably aim to drawdown growth only - which if for example you achieve an average of 5% would mean about £37.5k gross a year on average.

After your SP age your income would increase by at least another £10k up to close to £50k gross. If you do get the odd years growth that would take your total income above the basic rate allowance (£50k currently) you may wish to limit drawdowns to keep you within that allowance for a few years incase you get a few years of negative growth later to take up the slack.   

Edit: For any years of negative growth I would probably still drawdown up to the tax free allowance level (or more if saving depleted).

After age 75 then IHT may well become more of a driver for your pot - so you may well consider reducing withdrawals down closer to the tax free allowance minus SP at that stage if you have sufficient funds left outside of the pension to support your lifestyles.

For your wife's £175k I would firstly aim to contribute £3,600 a year until age 75 for the £180-£720 per year tax relief benefit.  

Edited: 

It might be worth giving your wife back her married allowance once she is able to start drawdown. I would then aim to withdraw up to the tax free allowance (currently £12,500) level which may well be able to be sustained indefinitely once she takes into account the 20+ extra £3,600 gross contributions, growth and reduced drawdowns once she reaches SP age.  

I would base your wife crystalisations/tax free lump sum withdrawals on keeping within the tax free lump sum recycling rules.

If your savings ever start to run out using the above approaches I would probably focus additional drawdowns on your wives pension pot first - as she should have plenty of 20% tax band available.

Thanks very much for this. What this is crying out for is a plan, a strategy to work towards, not just being told not to withdraw too much. Should my IFA be offering all sorts of options, advice, a plan of sorts because while others seem very comfortable about investing, to me this is a minefield.
When my wife’s fund becomes available in 2022, it offers another dynamic and opportunity with another personal tax allowance quota. My IFA produced a combined planner for both of us, but I am sure we need two planners as both are independent funds, and may be drawdown quite differently.
I think what you have written above is more than what my IFA has offered in over 3 years.

"Should my IFA be offering all sorts of options, advice, a plan of sorts because while others seem very comfortable about investing, to me this is a minefield."
What else would you be paying him for?
"My IFA produced a combined planner for both of us, but I am sure we need two planners as both are independent funds, and may be drawdown quite differently."
It should be one financial plan, optimised for both of the funds.

Yes agree it should be one plan, bringing both funds together. It was just the running of these funds showing what’s going on in two separate planners as I can see the amounts/the % withdrawals to be quite different perhaps?

Once the financial plan is created it is trivial to report on the various withdrawals, either on an individual year or over the whole retirement period.

I suppose many plans evolve over time, depending where you are on your journey.

Plans will constantly evolve and be updated. There's only one certainty when investing and that's uncertainty.