Pension Plan Correct?

236dave

Hi, I wanted to double check my pension plan was correct, any comments?

I'm 60 yrs old with my wife being 57.
I have £386k to use in flexi drawdown.
I also have a final salary scheme which is projected to be worth £200k at age 65. (I'd take 25% tax free, with a £7.5k / yr income @ 65)
My wife doesn't have a pension, and has a low income of £3k / yr.
I plan on getting my wife to transfer 10% of her tax allowance to myself, giving me £13,827 personal tax allowance.
If I retire at age 60, I would cystalise £78,692 in that year, taking 25% tax free (£19,673) and drawing down a further £13,827 (within my personal allowance)ie, £33.5k tax free!
I would continue with this method upto age 65, when I'd have exhausted my uncrystalised pot, and will then use some cash savings and also my final salary pension, until I reach 67.

JoeCrystal

236dave said:

I also have a final salary scheme which is projected to be worth £200k at age 65. (I'd take 25% tax free, with a £7.5k / yr income @ 65)

Doesn't work like that. Exactly what are they offering as a tax-free lump sum? Your final salary pension scheme does not have any pot of money attached to it  It is defined as whatever the final salary scheme rather than a simple 25% tax-free.

It might be worth looking at your wife having her own pension provision considering you are wasting her personal allowance. However, she can still contribute up to £3,600 gross per year regardless of her income. (Or higher if her income is higher than £3,600 per year).

Of course, bear in mind that you may have to take into account of few years' high inflation and whatever if you got enough overall.

Dazed_and_C0nfused

I plan on getting my wife to transfer 10% of her tax allowance to myself, giving me £13,827 personal tax allowance.

It doesn't work like that. You cannot have a Personal Allowance greater than £12,570.

If you are the recipient of Marriage Allowance it entitles you to a fixed deduction from your income tax liability. In the current tax year it's £252 (£1,260 x 20%).

It doesn't make any real difference to most people but it does to some.

Your wife would have a reduced Personal Allowance of £11,310.

I also have a final salary scheme which is projected to be worth £200k at age 65. (I'd take 25% tax free, with a £7.5k / yr income @ 65)

What you consider it to be "worth" is irrelevant, with a final salary scheme your pension, and any PCLS, is based on the scheme rules 

My wife doesn't have a pension, and has a low income of £3k / yr.

Have you considered funding a SIPP or personal pension for her adding £2,880 each tax year to gain £720 in basic rate tax relief?  Whilst she has so many unused Personal Allowances she can get the whole lot out without having to pay any income tax.

dunstonh

I also have a final salary scheme which is projected to be worth £200k at age 65. (I'd take 25% tax free, with a £7.5k / yr income @ 65)

Are you sure it is a defined benefit scheme?  DB schemes do not have projected values.   And you cannot take 25% tax free cash from a DB scheme as there is no value to apply the 25% to.   Instread they use a different method of calculation to work out the tax free cash.

I would continue with this method upto age 65, when I'd have exhausted my uncrystalised pot, and will then use some cash savings and also my final salary pension, until I reach 67.

And what happens after 67?

anonmoose

Wow you were planning on taking some  your wife's tax allowance yet she has no pension at all! Is she OK with this arrangement?

It might work for you both but makes me a bit uncomfortable when I hear married couples going into retirement with such an imbalance of control over pension provision. Unless of course you met much later in life.

She might be in the loop and fine with the figures but I wouldn't be if I was in that situation. 

I would at least consider starting her a SIPP as priority. 

Is she at least entitled to full state pension?

Kim1965

Agree, fairly basic tax planning attempts to utilise both allowances. 

bluearmy18

A friend has a DB scheme, and he has an app on his phone. His app is personalised with his salary details.  He was showing me that he can take a greater amount of cash up front and have a smaller amount of monthly salary...  I wonder if that is what the OP meant by taking a lump sum & having a smaller monthly amount?

236dave

anonmoose said:

Wow you were planning on taking some  your wife's tax allowance yet she has no pension at all! Is she OK with this arrangement?

It might work for you both but makes me a bit uncomfortable when I hear married couples going into retirement with such an imbalance of control over pension provision. Unless of course you met much later in life.

She might be in the loop and fine with the figures but I wouldn't be if I was in that situation. 

I would at least consider starting her a SIPP as priority. 

Is she at least entitled to full state pension?

Hi, The pension is for us both to live on, and my wife knows about it, we trust each other implicitly, so there is no problem.

Albermarle

bluearmy18 said:

A friend has a DB scheme, and he has an app on his phone. His app is personalised with his salary details.  He was showing me that he can take a greater amount of cash up front and have a smaller amount of monthly salary...  I wonder if that is what the OP meant by taking a lump sum & having a smaller monthly amount?

He is a lucky guy. To get such details from some large pension administrators can take weeks/months, and usually plenty of chasing up and complaining needed. Then often they send the wrong/inadequate info.

Dazed_and_C0nfused

236dave said:

anonmoose said:

Wow you were planning on taking some  your wife's tax allowance yet she has no pension at all! Is she OK with this arrangement?

It might work for you both but makes me a bit uncomfortable when I hear married couples going into retirement with such an imbalance of control over pension provision. Unless of course you met much later in life.

She might be in the loop and fine with the figures but I wouldn't be if I was in that situation. 

I would at least consider starting her a SIPP as priority. 

Is she at least entitled to full state pension?

Hi, The pension is for us both to live on, and my wife knows about it, we trust each other implicitly, so there is no problem.

But it is likely to be inefficient tax wise.

236dave

bluearmy18 said:

A friend has a DB scheme, and he has an app on his phone. His app is personalised with his salary details.  He was showing me that he can take a greater amount of cash up front and have a smaller amount of monthly salary...  I wonder if that is what the OP meant by taking a lump sum & having a smaller monthly amount?

Yes I have statetments that tell me that I can take 25% of its value @ age 65, as a tax free lump sum, but it reduces my income by 25%, which im ok with.
ie, @ age 65 predicted value =£200k, which would give a £10k/annum income
or I'm allowed to take £50k tax free and a reduced income of £7.5k/annum, which I plan to do!