Retirement options at 55

Sobeboy15

I have a DC pot of £125k which isn’t a great amount. I’m in a very fortunate state where I have approx £250k in savings and ISA’s.  I also own two properties mortgage free.  

I’m 53 years old 54 in February, and I’m thinking of taking my 25% lump sum when I’m 55.  Then I am thinking of making pension contributions of £2,880 so that I get tax relief to £3,600.  Am I relight in thinking I can do this and then each year till state pension age withdraw £3,600 tax free.  

I am currently not working and don’t expect to so not using any personal allowances. 

Any advice would be appreciated. 

marlot

I believe you can contribute £2880 and get tax relief to £3600 until you turn 75.

As you say, 25% of the £3600 is tax free.  The other 75% is at your marginal rate.  If the £3,600, income from your properties, pensions etc is below the personal allowance then yes, it'll be tax free..

Albermarle

As said you can contribute £2880 per tax year until age 75.

Presumably you will add this to your current DC pension? In which case you will not be constrained by only taking out a certain amount each year. The £3600 with the tax relief will just be added to your current £125K, and not kept separate in some way .

I’m in a very fortunate state where I have approx £250k in savings and ISA’s.

If you mean cash ISA's then that is a lot of cash, losing out to inflation. If you have a mix of cash savings and Stocks and shares ISA's that would probably be a better balance. 

dunstonh

I’m 53 years old 54 in February, and I’m thinking of taking my 25% lump sum when I’m 55.

Why?    That will likely reduce your tax efficiency over your lifetime.    So, unless you have a spending need that you cannot use funds from more appropriate places, it may not be the best thing to do.  

With two properties and £250k in savings, IHT could be an issue. So, using the pension money may not be tax efficient there either.

bostonerimus

Have you done a detailed budget and then compared that with the potential income you can draw from your DC and general investment accounts. You should use a range of rates of return and inflation to model your drawdown in retirement. Also make sure you are able to withstand a few large capital costs like major home repairs or a new car. You should also think about care home costs.

xylophone

I am currently not working and don’t expect to so not using any personal allowances. 

Are you receiving any rental income?

Have you obtained a state pension statement?

https://www.gov.uk/check-state-pension

Sobeboy15

To answer some of your questions all the cash is in stocks and shares isas so protected from capital gains.  I have no rental income as I use the properties myself.   

I have no income as not employed, I’m self funding from the isas as and when. 

I was looking at drawing some funds from my pensions and thought it would be tax efficient to take advantage of the tax relief available. 

You’ve given me food for thought. 

Thanks 

Dazed_and_C0nfused

Taking advantage of the tax relief is very sensible, if you can afford the £2,880 contribution you can get £720/year free money from the tax relief despite not paying any tax yourself.

xylophone

I have no income as not employed, I’m self funding from the isas as and when. 

In an earlier post you mentioned that you were widowed.

You do not benefit from a widow's pension?

And have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

macman

You can withdraw most of the £3,600 each year and recycle it into a SIPP. With accounts like HL you need to leave a nominal amount in to keep it open, maybe £100? Others may be able to confirm the minimum.

Albermarle

macman said:

You can withdraw most of the £3,600 each year and recycle it into a SIPP. With accounts like HL you need to leave a nominal amount in to keep it open, maybe £100? Others may be able to confirm the minimum.

The OP already has a DC pension pot of £125K , so if they use this then the £3600 will just go into the pot, and they can withdraw what they want when they want it.