Drawdown etc

Organgrinder

Indeed. It is very helpful.

I retrained to be a teacher, hence my final salary scheme/average salary are very attractive. At 55 I will have about 12k p/a and with my other two DB schemes about 27k. By 60 (when i'm planning to retire) the schemes combined at today's rates should be worth approx 32k less of course the reduction for early retirement.

So I plan on contuining to work and pay into a defined benefits pension. Broadly speaking earn about £45k per annum.

Hence my question about the 50k roughly I have in DC pots. For ease i'll round the figures.

So assuming £40k is left after i take a tax free sum I could draw down 4k a year for 10 years, £3.2k after tax, reinvest it every year and get the tax back and then cash it in at say 65 with 25% tax free.

I'm highly unlikely to enter the 40% tax bracket and also assume i could use my wife's allowances to pay into her pension if i wanted to invest more.

If the above is correct it seems a good way to go.

MallyGirl

Seems right to me. A benefit of being active in a DB pension is that triggering the MPAA doesn't affect you.

Organgrinder

It seems very attractive from a tax perspective. Pay back in....then take more out tax free. Seems the way to go. Thank you.

jamesd

MallyGirl said:

Seems right to me. A benefit of being active in a DB pension is that triggering the MPAA doesn't affect you.

Just to be sure: it does affect those in DB schemes but only for their DC contributions. DC is capped at 4k and DB can use the unused part up to 40k. Mentioned in part because it seems that Orangrinder may be considering ongoing DC as well as the DB.

Albermarle

So assuming £40k is left after i take a tax free sum I could draw down 4k a year for 10 years, £3.2k after tax, reinvest it every year and get the tax back and then cash it in at say 65 with 25% tax free.

You still have one choice to make 

If you leave the £40K as cash in the pension ( some people do to avoid investment risk) , it will get eroded by inflation. So the £4K you take out after 10 years , will only be worth about £3K in todays money.

To keep ahead of inflation you will need to keep the money in the pension invested , or at least partly invested . This brings a risk that your fund may go down in poor market conditions, but over 10 years this should be long enough to ride out most downturns in a positive way ,

Organgrinder

As i stated I intend reinvesting in a different pension fund.