Pension pot movement

Albermarle

Rhanaroo said:

MallyGirl said:

You haven't given enough info. 

By leaving it in you may eventually pay 20% tax on it. Draw it down and buy the same fund in an ISA and then it wouldn't matter what the 'state if the market' was. You'd just have moved an investment from a taxable wrapper into a tax protected wrapper.

I now understand.

Not sure why my IFA didn't recommend this. Maybe a question I need to ask

His attitude seemed to be if you don't need to take it leave it where is. 

The general advice with pension pots is to leave them alone, unless you need the money. Many people take all the 25% tax free cash as soon as they can, even when they do not need it. Then they do not know what to do with it.

However on the opposite side you do not want to waste your personal tax allowance by having years with no taxable income.
In this case the usual route is to take a UFPLS payment of £16,760 from the pension each tax year that you have no other taxable income . 
This is 25% tax free ( £4190) and 75% taxable ( £12,570) . As your personal allowance is £12570 , then no tax is actually payable.
If you do not need the money, you can reinvest in an ISA.
The main drawback is once you take this payment you are restricted on how much you can contribute to a pension in future. ( £4000) .
Of course once you have other taxable income, like the state pension, the calculation changes.

fiddlerman

My pot was 78k in Nov 21 and is now 66k......in a 'lifestyle' fund supposedly less volatile in run up to retirement in Dec 22.

dunstonh

fiddlerman said:

My pot was 78k in Nov 21 and is now 66k......in a 'lifestyle' fund supposedly less volatile in run up to retirement in Dec 22.

It is less volatile.   Lower volatility does not mean that it will escape short term losses.   

Thrugelmir

fiddlerman said:

My pot was 78k in Nov 21 and is now 66k......in a 'lifestyle' fund supposedly less volatile in run up to retirement in Dec 22.

Was it a target retirement fund?  Lifestyle funds are graded for volatility.  What level did you choose. 

Albermarle

fiddlerman said:

My pot was 78k in Nov 21 and is now 66k......in a 'lifestyle' fund supposedly less volatile in run up to retirement in Dec 22.

One issue is that these funds decrease the level of 'risky' equity, and increase the level of 'low risk' bonds as you approach retirement.
Unfortunately bonds have not been doing very well and have dropped as well. So somewhat unusually, lower risk funds have been performing worse than some higher risk ones , even though markets have been sliding.

coyrls

fiddlerman said:

My pot was 78k in Nov 21 and is now 66k......in a 'lifestyle' fund supposedly less volatile in run up to retirement in Dec 22.

Lifestyle arrangements were designed when people typically took an annuity when they retired.  The aim was to align with annuity rates, to provide some stability in the projected pension in the years running up to retirement.  In that respect your lifestyle arrangement has performed as expected, as your pot value has declined, annuity rates have risen therefore reducing the variability of annuity projections.  If you do not plan to purchase an annuity at retirement, it may not have been appropriate for you to be in a lifestyle arrangement.

fiddlerman

Thanks for replies to my reply to original poster
I have started another thread 'Interest rates up Lifestyle funds down' so as not to clog up the original posters question.....

gh67

MallyGirl said:

As Dunstonh says, if you will have no income between 55 and 60, it might be better to drawdown £12k ish to use your 0% tax band - even if you just reinvest in exactly the same thing in an ISA to protect it from future tax. With the 25% tax free element that actually means you could take £16k ish out each year and pay no tax. This avoids you paying tax on this 5x12k = £60k further down the line - a saving of £12k is not to be sniffed at.
This does all depend on the value of the pension, your plans for withdrawal, what SP you have built up etc.

Thanks for pointing this out, I’ve had a think about this and came up with an idea but not sure if it’s allowed or makes sense.

if I was to take my £12k tax free each year could I then give it to my wife to invest in her pension, my thoughts are she would get 20% from the government so over 5 years that would be an extra £12k. As her pension won’t be over £12k she’ll never pay tax on it, that’s if this is even possible. 

QrizB

gh67 said:

MallyGirl said:

As Dunstonh says, if you will have no income between 55 and 60, it might be better to drawdown £12k ish to use your 0% tax band - even if you just reinvest in exactly the same thing in an ISA to protect it from future tax. With the 25% tax free element that actually means you could take £16k ish out each year and pay no tax. This avoids you paying tax on this 5x12k = £60k further down the line - a saving of £12k is not to be sniffed at.
This does all depend on the value of the pension, your plans for withdrawal, what SP you have built up etc.

Thanks for pointing this out, I’ve had a think about this and came up with an idea but not sure if it’s allowed or makes sense.

if I was to take my £12k tax free each year could I then give it to my wife to invest in her pension, my thoughts are she would get 20% from the government so over 5 years that would be an extra £12k. As her pension won’t be over £12k she’ll never pay tax on it, that’s if this is even possible. 

Does your wife earn at least £16k pa so she can make a £12k pension contribution?

gh67

QrizB said:

gh67 said:

MallyGirl said:

As Dunstonh says, if you will have no income between 55 and 60, it might be better to drawdown £12k ish to use your 0% tax band - even if you just reinvest in exactly the same thing in an ISA to protect it from future tax. With the 25% tax free element that actually means you could take £16k ish out each year and pay no tax. This avoids you paying tax on this 5x12k = £60k further down the line - a saving of £12k is not to be sniffed at.
This does all depend on the value of the pension, your plans for withdrawal, what SP you have built up etc.

Thanks for pointing this out, I’ve had a think about this and came up with an idea but not sure if it’s allowed or makes sense.

if I was to take my £12k tax free each year could I then give it to my wife to invest in her pension, my thoughts are she would get 20% from the government so over 5 years that would be an extra £12k. As her pension won’t be over £12k she’ll never pay tax on it, that’s if this is even possible. 

Does your wife earn at least £16k pa so she can make a £12k pension contribution?

I knew it was a daft idea 😂😂 she does earn more than that just now but wouldn’t then as she would also retire. Might be worth sticking some more in while she’s working.