A Paupers Pension Tale (Not many nuts to dig up)

gambleruk

michaels said:

gambleruk said:

Simon11 said:

Keeping it in the pension, gives it the best chance of continuing to grow as much as possible (tax free too) and thus give you more money when you do eventually decide to take out your 25% tax free with a specific purpose in mind.

Sorry probably not explaining it clearly, my pension is currently in Vanguard Vls80 so the plan is to open a stocks and shares ISA and use my tax free pension money every year to buy Vanguard Vls80 in that so basically all I am doing is changing from a pension to an ISA so when the time comes to access my money which will be before SP anyway it will be there tax free.

Makes sense to me, you don't want to leave any personal allowance unused and then end up paying tax once you get your state pension.  Also worth doing as it is a hedge against future govt pension rule changes.

Not sure if the small pots helps or not if the mpaa does not come into play?

I am expecting to get £600 from best invest soon for a switch of some funds to them which I think will then be able to be sent elsewhere, main pot is with II but I may look for a more circuitous route to get in there in return for any incentives - is the incentive thread still around somewhere?

https://forums.moneysavingexpert.com/discussion/comment/80285129#Comment_80285129

There's the link for it, I found it useful.

[Deleted User]

Do you have a partner? I can't get my head around bills of 520 a month! Sorry maybe its just just me.

Albermarle

gambleruk said:

Simon11 said:

Keeping it in the pension, gives it the best chance of continuing to grow as much as possible (tax free too) and thus give you more money when you do eventually decide to take out your 25% tax free with a specific purpose in mind.

Sorry probably not explaining it clearly, my pension is currently in Vanguard Vls80 so the plan is to open a stocks and shares ISA and use my tax free pension money every year to buy Vanguard Vls80 in that so basically all I am doing is changing from a pension to an ISA so when the time comes to access my money which will be before SP anyway it will be there tax free.

I think I Have spotted the misunderstanding.
When you say tax free, it is assumed you just mean the 25% that is tax free. ( so just transferring that to an ISA is a bit pointless) 
However I presume you actually mean taking the 25% tax free, and taking taxable money from the pension each year at a level below your personal allowance, so you do not pay any tax on it. So in effect it is all tax free.

gambleruk

Albermarle said:

gambleruk said:

Simon11 said:

Keeping it in the pension, gives it the best chance of continuing to grow as much as possible (tax free too) and thus give you more money when you do eventually decide to take out your 25% tax free with a specific purpose in mind.

Sorry probably not explaining it clearly, my pension is currently in Vanguard Vls80 so the plan is to open a stocks and shares ISA and use my tax free pension money every year to buy Vanguard Vls80 in that so basically all I am doing is changing from a pension to an ISA so when the time comes to access my money which will be before SP anyway it will be there tax free.

I think I Have spotted the misunderstanding.
When you say tax free, it is assumed you just mean the 25% that is tax free. ( so just transferring that to an ISA is a bit pointless) 
However I presume you actually mean taking the 25% tax free, and taking taxable money from the pension each year at a level below your personal allowance, so you do not pay any tax on it. So in effect it is all tax free.

Yep sorry you are correct, I plan to take £11,310 out of my pension into the ISA every year and the extra 25% of around 4k, so my plan to use the small pots rule to release another 30,000 would gain me 2 years worth of withdrawals if that makes sense.

NoMore

What do you think the small pots rule is gaining you ? The only advantage is they don't trigger the MPAA and they don't count against the LTA (which is being abolished anyway). They are still taxable as a UFPLS so only 25% of each small pot is tax free. For some reason people think they are fully tax free but they are not.

dealyboy

gambleruk said:

Albermarle said:

gambleruk said:

Simon11 said:

Keeping it in the pension, gives it the best chance of continuing to grow as much as possible (tax free too) and thus give you more money when you do eventually decide to take out your 25% tax free with a specific purpose in mind.

Sorry probably not explaining it clearly, my pension is currently in Vanguard Vls80 so the plan is to open a stocks and shares ISA and use my tax free pension money every year to buy Vanguard Vls80 in that so basically all I am doing is changing from a pension to an ISA so when the time comes to access my money which will be before SP anyway it will be there tax free.

I think I Have spotted the misunderstanding.
When you say tax free, it is assumed you just mean the 25% that is tax free. ( so just transferring that to an ISA is a bit pointless) 
However I presume you actually mean taking the 25% tax free, and taking taxable money from the pension each year at a level below your personal allowance, so you do not pay any tax on it. So in effect it is all tax free.

Yep sorry you are correct, I plan to take £11,310 out of my pension into the ISA every year and the extra 25% of around 4k, so my plan to use the small pots rule to release another 30,000 would gain me 2 years worth of withdrawals if that makes sense.

Hi @gambleruk ...
I am retired on state pension and have an S&S ISA that dwarfs my SIPP, I understand perfectly what you're doing.

Of course you can add £2,880 to your pension to gain £720 to add to your uncrystallized pot and that will be included in your UFPLS ride.

One other benefit is that an S&S ISA is cheaper to run than a SIPP, especially if it's iWeb's.

Forgive me I don't understand the relevance of the 'small pots rule' in your plan, this is for small separate pensions up to £10k each which can be taken as a lump sum with a maximum combined total of £30k, in each case 25% is tax free and 75% taxed.  The MPAA is protected by the rule but you will trigger that anyway.

barnstar2077

[Deleted User] said:

Do you have a partner? I can't get my head around bills of 520 a month! Sorry maybe its just just me.

I do have a partner, but we do not live together.  The £520 is just bills, obviously I spend a lot more than that during the month, with money going into my ISA and pensions as well as a decent amount of spending money.

I don't need to drive, nor do I have an expensive phone plan or every streaming service going, or spend £9 on my lunch in Costa every day, or sky sports, or any other expensive habits really (besides dating! :  )

My idea of fun is a good walk along a beach, or an area with some interesting architecture, or a park etc, all with some good company.  I like to go and explore places and have some adventures.  I am also partial to some crazy golf or a few games of pool, but they are not exactly bank breaking.

I used to spend so much money on stuff, it pains me to think about how deeply shallow I used to be :   )  Now I don't even think about buying stuff, because I am much happier with the life that I have now (no longer working Wednesdays is also a massive factor to my new found serenity.)

The final piece of the puzzle will be to retire!

gambleruk

Sorry folks I did not realise the small pots rule was taxable, thanks to all of you who have commented and pointed me in the right direction, like I said still 18 months off but at least I know what I can do now and plan accordingly. 

Albermarle

One other benefit is that an S&S ISA is cheaper to run than a SIPP, especially if it's iWeb's.

The very low cost platforms l, do usually charge extra for a SIPP and often for each withdrawal/drawdown.

The more expensive platforms usually do not charge any extra, or for drawdown/withdrawals. This makes them generally uncompetitive for ISA's, but for SIPP's it is less clear cut.

hostertlady

I love reading this thread about pensions, i just wish i could understand the jargon.. me and hubby are useless and we don't have a plan (yet).. i can tell you where every single penny is right now, bank accounts, Isa's, building society, pension pot, insurance policies etc...
But its where to start!
but i will continue to read these posts and  hopefully  things will sink in and we decide which financial advisor we need to speak to......