Retirement options

Stargunner

I am considering retiring within the next 2 years when I am 60. When I do I will have no income. I have enough money in other savings and investments to see me through until I reach state retirement age, so i don't need to take anything from my sipp which is currently worth around £280k. As i will have no income I wondered if I would be best to make use of my taxable allowance each year until I start getting my state pension by withdrawing it from my sipp and I could reinvest that money back into a stocks and shares ISA. I would also need to consider if it is best to take TFLS upfront or as part of each withdrawal. I could also pay in the maximum amount allowed each year back into my sipp which I think is around £3600 per year.  

MX5huggy

If you have money to live off when you retire then you should be living of that money now and stuffing all your earnings into pension now (up to allowed limits).

Yes use your taxable allowance each year (use it or loose it). If you don’t need/want the money just take the 25% as you go along. You pay £2880 in per year which revives tax relief to turn it into £3600.

if you are a higher rate tax payer or Salary Sacrificing pension contributions it’s even more advantageous. 

dunstonh

As i will have no income I wondered if I would be best to make use of my taxable allowance each year until I start getting my state pension by withdrawing it from my sipp and I could reinvest that money back into a stocks and shares ISA.

Is your estate likely to be subject to IHT or within the IHT band?
Taking money out of the pension to put in an ISA can be a good idea if your estate is not going to be subject to IHT but it could be costly if you it is going to be as the pension is outside of the estate.

You could re-utilise the annual £3600 pension allowance.

Also consider deferring the state pension for a number of years.

 I would also need to consider if it is best to take TFLS upfront or as part of each withdrawal.

Start on the basis that its not a good idea to take it out up front unless there is a justification for doing so. If there is no justification then leave it in the pension.

Stargunner

dunstonh said:

As i will have no income I wondered if I would be best to make use of my taxable allowance each year until I start getting my state pension by withdrawing it from my sipp and I could reinvest that money back into a stocks and shares ISA.

Is your estate likely to be subject to IHT or within the IHT band?
Taking money out of the pension to put in an ISA can be a good idea if your estate is not going to be subject to IHT but it could be costly if you it is going to be as the pension is outside of the estate.

You could re-utilise the annual £3600 pension allowance.

Also consider deferring the state pension for a number of years.

 I would also need to consider if it is best to take TFLS upfront or as part of each withdrawal.

Start on the basis that its not a good idea to take it out up front unless there is a justification for doing so. If there is no justification then leave it in the pension.

Although my estate would currently be subject to IHT I was planning on living off my other savings/investments first during my retirement to reduce those, which would then over time bring me under the threshold .

dunstonh

Stargunner said:

dunstonh said:

As i will have no income I wondered if I would be best to make use of my taxable allowance each year until I start getting my state pension by withdrawing it from my sipp and I could reinvest that money back into a stocks and shares ISA.

Is your estate likely to be subject to IHT or within the IHT band?
Taking money out of the pension to put in an ISA can be a good idea if your estate is not going to be subject to IHT but it could be costly if you it is going to be as the pension is outside of the estate.

You could re-utilise the annual £3600 pension allowance.

Also consider deferring the state pension for a number of years.

 I would also need to consider if it is best to take TFLS upfront or as part of each withdrawal.

Start on the basis that its not a good idea to take it out up front unless there is a justification for doing so. If there is no justification then leave it in the pension.

Although my estate would currently be subject to IHT I was planning on living off my other savings/investments first during my retirement to reduce those, which would then over time bring me under the threshold .

You may be more suited to a hybrid approach of drawing from multiple sources rather than one at a time.

e.g. used phased flexi-access drawdown to draw almost £16,500 from the pension (paid as 75% taxable, 25% tax free) which would be free of tax.  Then use your other investments/savings to fund the rest.  And defer the state pension until a time that balances nicely with life expectancy vs the increase you get for deferring it.

You will have a need for capital spending in retirement.  So, always leave enough for those sorts of things. Plus, with drawdown, you want scope to cover negative periods.  Either by retaining cash in the pension or outside of the pension (using whichever method is best -  or a combination).