Pension Question

eric4395

I am in my mid 60's and will prob retire later this year I have a  previous  6 figure works pension lying in drawdown. I have been receiving my gov pension over the last year and will be paying about £4,000 in tax on this as I am in the higher tax bracket. I was thinking off adding this amount approx £12,000  into my previous works pension as an AVC which would work out at £15,000 with the tax relief and at least get some of the tax back that I will have to pay on my gov pension. Prob a sound idea however like everyone else because of the situation in Ukraine and the markets being poor this year in general I am down  about £8000  from Jan in my 6 figure pension.
So I am wondering whether it is a good idea or not to carry on and add this £12,000 sum at the moment as it will very well dissappear over the next few months with the markets on the way down.
Interested in anyone else's view as to what they would do although I do realise there is no easy answer. Thanks to any replies.
  

Albermarle

By Government pension, do you mean state pension ? If so you could well have been better off deferring it until you stopped work , to avoid paying 40% tax on it .

 however like everyone else because of the situation in Ukraine and the markets being poor this year in general I am down  about £8000  from Jan in my 6 figure pension. A typical medium risk pension portfolio is probably down about 7% ytd, which is not so dramatic considering it went up by the same amount in many of the preceding years ,
So I am wondering whether it is a good idea or not to carry on and add this £12,000 sum at the moment as it will very well dissappear over the next few months with the markets on the way down. You or I ( or anybody ) has no idea if they will go down or not . The market has presumably already priced in current risks, and that the situation in Ukraine will get worse before it gets better. If unexpectedly the situation deteriorates a lot more , or gets better , then the market will react accordingly .

Cheese1990

You say your pension is in drawdown are you subject to MPAA as this may scupper your plan as to how much you can pay in 

eric4395

Albermarle said:

By Government pension, do you mean state pension ? If so you could well have been better off deferring it until you stopped work , to avoid paying 40% tax on it .

 however like everyone else because of the situation in Ukraine and the markets being poor this year in general I am down  about £8000  from Jan in my 6 figure pension. A typical medium risk pension portfolio is probably down about 7% ytd, which is not so dramatic considering it went up by the same amount in many of the preceding years ,
So I am wondering whether it is a good idea or not to carry on and add this £12,000 sum at the moment as it will very well dissappear over the next few months with the markets on the way down. You or I ( or anybody ) has no idea if they will go down or not . The market has presumably already priced in current risks, and that the situation in Ukraine will get worse before it gets better. If unexpectedly the situation deteriorates a lot more , or gets better , then the market will react 

Yes sorry state pension. I remember looking at doing that but when I checked the figures I am sure it was over  15 years before you actually gained out of it ?

Daliah

eric4395 said:

Albermarle said:

By Government pension, do you mean state pension ? If so you could well have been better off deferring it until you stopped work , to avoid paying 40% tax on it .

 however like everyone else because of the situation in Ukraine and the markets being poor this year in general I am down  about £8000  from Jan in my 6 figure pension. A typical medium risk pension portfolio is probably down about 7% ytd, which is not so dramatic considering it went up by the same amount in many of the preceding years ,
So I am wondering whether it is a good idea or not to carry on and add this £12,000 sum at the moment as it will very well dissappear over the next few months with the markets on the way down. You or I ( or anybody ) has no idea if they will go down or not . The market has presumably already priced in current risks, and that the situation in Ukraine will get worse before it gets better. If unexpectedly the situation deteriorates a lot more , or gets better , then the market will react 

Yes sorry state pension. I remember looking at doing that but when I checked the figures I am sure it was over  15 years before you actually gained out of it ?

Deferring as such no longer has any financial benefits on its own. It might, however, help with getting your income to below the higher rate limit. Whether it would actually be of benefit to you depends on your total income now, and after you stop working, and on the amount of money you need to spend each month.

Albermarle

eric4395 said:

Albermarle said:

By Government pension, do you mean state pension ? If so you could well have been better off deferring it until you stopped work , to avoid paying 40% tax on it .

 however like everyone else because of the situation in Ukraine and the markets being poor this year in general I am down  about £8000  from Jan in my 6 figure pension. A typical medium risk pension portfolio is probably down about 7% ytd, which is not so dramatic considering it went up by the same amount in many of the preceding years ,
So I am wondering whether it is a good idea or not to carry on and add this £12,000 sum at the moment as it will very well dissappear over the next few months with the markets on the way down. You or I ( or anybody ) has no idea if they will go down or not . The market has presumably already priced in current risks, and that the situation in Ukraine will get worse before it gets better. If unexpectedly the situation deteriorates a lot more , or gets better , then the market will react 

Yes sorry state pension. I remember looking at doing that but when I checked the figures I am sure it was over  15 years before you actually gained out of it ?

As you are statistically likely to live more than 15 years from when you start getting state pension , there is still some small benefit . However if you do not pay 40% tax on it now and take a higher pension later and only pay 20% tax , then that 15 years will be reduced .

Audaxer

Daliah said:

eric4395 said:

Albermarle said:

By Government pension, do you mean state pension ? If so you could well have been better off deferring it until you stopped work , to avoid paying 40% tax on it .

 however like everyone else because of the situation in Ukraine and the markets being poor this year in general I am down  about £8000  from Jan in my 6 figure pension. A typical medium risk pension portfolio is probably down about 7% ytd, which is not so dramatic considering it went up by the same amount in many of the preceding years ,
So I am wondering whether it is a good idea or not to carry on and add this £12,000 sum at the moment as it will very well dissappear over the next few months with the markets on the way down. You or I ( or anybody ) has no idea if they will go down or not . The market has presumably already priced in current risks, and that the situation in Ukraine will get worse before it gets better. If unexpectedly the situation deteriorates a lot more , or gets better , then the market will react 

Yes sorry state pension. I remember looking at doing that but when I checked the figures I am sure it was over  15 years before you actually gained out of it ?

Deferring as such no longer has any financial benefits on its own. 

I know deferring the new State Pension is now worth only an increase of 5.8% per annum, but I think it's still worth considering for a few years if you can afford it, even if not a higher rate taxpayer.

Daliah

Audaxer said:

Daliah said:

eric4395 said:

Albermarle said:

By Government pension, do you mean state pension ? If so you could well have been better off deferring it until you stopped work , to avoid paying 40% tax on it .

 however like everyone else because of the situation in Ukraine and the markets being poor this year in general I am down  about £8000  from Jan in my 6 figure pension. A typical medium risk pension portfolio is probably down about 7% ytd, which is not so dramatic considering it went up by the same amount in many of the preceding years ,
So I am wondering whether it is a good idea or not to carry on and add this £12,000 sum at the moment as it will very well dissappear over the next few months with the markets on the way down. You or I ( or anybody ) has no idea if they will go down or not . The market has presumably already priced in current risks, and that the situation in Ukraine will get worse before it gets better. If unexpectedly the situation deteriorates a lot more , or gets better , then the market will react 

Yes sorry state pension. I remember looking at doing that but when I checked the figures I am sure it was over  15 years before you actually gained out of it ?

Deferring as such no longer has any financial benefits on its own. 

I know deferring the new State Pension is now worth only an increase of 5.8% per annum, but I think it's still worth considering for a few years if you can afford it, even if not a higher rate taxpayer.

The only discernible advantage would be for someone who is now a HR tax payer and expects to become a BR tax payer later on. http://paullewismoney.blogspot.com/2015/10/bigger-pension-from-deferring.html

Audaxer

Daliah said:

Audaxer said:

Daliah said:

eric4395 said:

Albermarle said:

By Government pension, do you mean state pension ? If so you could well have been better off deferring it until you stopped work , to avoid paying 40% tax on it .

 however like everyone else because of the situation in Ukraine and the markets being poor this year in general I am down  about £8000  from Jan in my 6 figure pension. A typical medium risk pension portfolio is probably down about 7% ytd, which is not so dramatic considering it went up by the same amount in many of the preceding years ,
So I am wondering whether it is a good idea or not to carry on and add this £12,000 sum at the moment as it will very well dissappear over the next few months with the markets on the way down. You or I ( or anybody ) has no idea if they will go down or not . The market has presumably already priced in current risks, and that the situation in Ukraine will get worse before it gets better. If unexpectedly the situation deteriorates a lot more , or gets better , then the market will react 

Yes sorry state pension. I remember looking at doing that but when I checked the figures I am sure it was over  15 years before you actually gained out of it ?

Deferring as such no longer has any financial benefits on its own. 

I know deferring the new State Pension is now worth only an increase of 5.8% per annum, but I think it's still worth considering for a few years if you can afford it, even if not a higher rate taxpayer.

The only discernible advantage would be for someone who is now a HR tax payer and expects to become a BR tax payer later on. http://paullewismoney.blogspot.com/2015/10/bigger-pension-from-deferring.html

I am retired and a basic rate taxpayer, with not that long until I reach State Pension age. If I was to defer the State Pension for say 1 year, that would cost me around £7,700 after tax in lost SP income, but I would get an extra £446 income per year after tax, increasing with inflation. The way I look at it is that at 5.8% per year increasing with inflation, its a better rate than annuities and a better yield than I get from most bond and equity income funds that I hold. For that reason I certainly think it's worth considering.

Daliah

Have a look at what Dr. John Dagpunar, visiting Research Fellow within Mathematical Sciences at the University of Southampton worked out in 2015. Since then, SP age has been equalised, so the advantage women still had for a few years has now also evaporated and now it's not worth anyone's while except for those who could make income tax savings, as mentioned earlier.

Audaxer

Daliah said:

Have a look at what Dr. John Dagpunar, visiting Research Fellow within Mathematical Sciences at the University of Southampton worked out in 2015. Since then, SP age has been equalised, so the advantage women still had for a few years has now also evaporated and now it's not worth anyone's while except for those who could make income tax savings, as mentioned earlier.

I have read it and I take the point that "it is probably not worth deferring under the new rules" as you may not recoup your deferred amount. However I think that is similar to someone buying an annuity in their late 60s or even 70s, where they are probably even less likely to recoup the cost, as they are unlikely to get as much as 5.8% increasing with inflation from an annuity. I just think because of that it is worth considering deferring for a year or two for those that can afford it, and want to increase their guaranteed income for the rest of their lives.