Bridging the gap from 57 to state pension 67

jamesd

ChocolateWombat said:

... We could afford to save more now to provide some bridging money for the period between 60 and 67. What is a good way to do this ... We already have no mortgage and enough savings to ourchase a small buy to let property without a mortgage, which would generate a further small income (about £6k after costs we think) leaving us about £50k remaining in savings. 

You have a major opportunity there. Pension contributions first with the savings, BTL later.

You're each allowed to make personal contributions to a personal pension that have a gross value (after 25% is added to give basic rate 20% tax relief) up to your gross pay. From age 55 you can take out 25% tax free and leave the rest in a flexi-access drawdown account until you're ready to accept a £4,000 a year cap, the Money Purchase Annual Allowance. Then you can draw on the 75% as taxable income whenever you wish.

You can say take the 25% into a bank account in your name when you stop working and can gift it to him to help him do the same. If there's enough money, do contributions for you both from now. If it helps, while still working you can:

1. take up to £7,500 of tax free lump sum per rolling 12 month period (not tax or calendar year)
2.use the small pot rule to take up to £10,000 that is the whole value of a pot. You can use transfers to get to £10,000. You can each do this up to three times per human lifetime. This is 25% tax free and  75% taxable income if not taken from a drawdown pot on which you've already received 25% tax free.

Taking out taxable money after you've retired is a particularly good move because your personal allowance increases how much gets out without tax.