Early retirement (for now) Pension V savings for an income

xylophone

I'm unsure whether to live off the severance money for a year + or drawdown.
I have 1 pension combined £200k with L&G (was workplace and transferred DB) and 1 pot with St James Place (£150k) 
I know the L&G offers drawdown, don't think I need to transfer on either one and IFA is casting his eye over it. 
Yes 25% would cover mortgage (£52k)but as I have a much younger other half this isn't really an issue with a low fixed rate.

Will your severance money cover your needs for a year?

If so, you might prefer not to access the pensions until this money has been exhausted?

On the other hand, you might decide that you do wish to take advantage of drawing enough from one of the pensions  to utilise your personal allowance.

You have various options.

You might decide that you would simply take the whole of the tax free pension commencement lump sum  (25% of the whole) and leave the remaining 75% in the pot until such time as you needed to access it.

You might live off this money, perhaps permitting your husband to increase his pension contributions.

When you access  the 75%, it is taxable as income - if you have no other taxable income in the tax year, up to the personal allowance (currently £12,750) is tax free.

You might prefer to use another option.

Rather than take the 25% tax free all at once ,you might prefer to use UFPLS.

This would involve taking a series of lump sums from your pension, a quarter of which would be tax free with the balance potentially taxable.

 If you had no other taxable income, you could crystallise £16,760 from one of your pension pots.   Of the £16,760, 25% would be tax-free (£4,190) with the remaining 75% (£12,570) paid as income but equals your personal income tax allowance.

This would not prevent your taking a tax free PCLS of up to 25% of your other pension pot at the same time if that was what you wished to do.

You mention an IFA - I am rather surprised that he hasn't  gone over your finances and come up with  rather more than just a simple suggestion that you could pay off your mortgage.

With regard to the St James Place pension, are you content that this is the best place for you?

https://forums.moneysavingexpert.com/discussion/6201686/st-jamess-place-review

DeadlyD

xylophone said:

I'm unsure whether to live off the severance money for a year + or drawdown.
I have 1 pension combined £200k with L&G (was workplace and transferred DB) and 1 pot with St James Place (£150k) 
I know the L&G offers drawdown, don't think I need to transfer on either one and IFA is casting his eye over it. 
Yes 25% would cover mortgage (£52k)but as I have a much younger other half this isn't really an issue with a low fixed rate.

Will your severance money cover your needs for a year?

If so, you might prefer not to access the pensions until this money has been exhausted?

On the other hand, you might decide that you do wish to take advantage of drawing enough from one of the pensions  to utilise your personal allowance.

You have various options.

You might decide that you would simply take the whole of the tax free pension commencement lump sum  (25% of the whole) and leave the remaining 75% in the pot until such time as you needed to access it.

You might live off this money, perhaps permitting your husband to increase his pension contributions.

When you access  the 75%, it is taxable as income - if you have no other taxable income in the tax year, up to the personal allowance (currently £12,750) is tax free.

You might prefer to use another option.

Rather than take the 25% tax free all at once ,you might prefer to use UFPLS.

This would involve taking a series of lump sums from your pension, a quarter of which would be tax free with the balance potentially taxable.

 If you had no other taxable income, you could crystallise £16,760 from one of your pension pots.   Of the £16,760, 25% would be tax-free (£4,190) with the remaining 75% (£12,570) paid as income but equals your personal income tax allowance.

This would not prevent your taking a tax free PCLS of up to 25% of your other pension pot at the same time if that was what you wished to do.

You mention an IFA - I am rather surprised that he hasn't  gone over your finances and come up with  rather more than just a simple suggestion that you could pay off your mortgage.

With regard to the St James Place pension, are you content that this is the best place for you?

https://forums.moneysavingexpert.com/discussion/6201686/st-jamess-place-review

Great advise, in response yes the severance would last 2 years. I would have to think hard about whether to take the £12,570 tax free allowance if it then limits future pension contributions, definitely in the 1st year. 
What is a UFPLS? 
If I crystallise £16,760 (how do you do that & does that mean putting it into drawdown) would that impact future pension contributions?  Not sure if I understand that the 25% (Pot 2) would remain intact if taking the extra £4190? or is that from Pot 1 & tax free? 

"This would not prevent your taking a tax free PCLS of up to 25% of your other pension pot at the same time if that was what you wished to do"  - Great news!

The IFA was the one that recommended the transfer and in fairness I'm not paying for his advise. I just provided him an update and asked a few questions. 

I'm tied in until 2025 with SJP - hmmmm, but I must say the return on the investment was great until we entered this crisis. 

On another note, where should one put a severance package.. now that's another minefield !!! 

DeadlyD

DeadlyD said:

Found this - crikey I didn't realise I would need to be a financial expert to deal with a pension.https://forums.moneysavingexpert.com/discussion/6110356/ufpls-vs-flexi-access-drawdown-pros-and-cons

Can someone explain in simple lay man / woman terms what it all means. If I put the £200k in drawdown with L&G can I use either scenario? 

Albermarle

DeadlyD said:

DeadlyD said:

Found this - crikey I didn't realise I would need to be a financial expert to deal with a pension.https://forums.moneysavingexpert.com/discussion/6110356/ufpls-vs-flexi-access-drawdown-pros-and-cons

Can someone explain in simple lay man / woman terms what it all means. If I put the £200k in drawdown with L&G can I use either scenario? 

I am afraid pensions are not that simple, especially as you are looking for flexibility rather than a regular  income, and you will need to read all the links and posts carefully, probably more than once. Probably fair to say that simplicity is one of the advantages of a DB pension....
If you can understand the concept of pension crystallisation, I find then a lot of these other questions answer themselves.
Your pots are currently uncrystallised. Let's just look at one to keep it simple.
To take money from it, some or all of it needs to be crystallised.
So if you have £200K and want to take all the 25% tax free cash ( £50K) you have to crystallise the whole pension. 25% is paid as tax free cash and 75% ( £150K)  is then a crystallised pot. You can not take anymore tax free cash from a crystallised pot, and any money you take from this crystallised part is potentially taxable.
Now lets's say you only want £10K tax free cash. Then you have to crystallise £40K.
You end up with £10K tax free cash; £30K crystallised and £160K remains uncrystallised.
Then next time you want some money, you could take some from the £30K and maybe pay some tax on it OR crystallise some more of the still uncrystallised part, and just take some more tax free cash. 
OR as has been explained in a couple of pots, you can take some tax free cash and some taxable income at the same time.
If it is really confusing you , you may want to consider paying the IFA for more advice, or ask the SJP advisor to help you.

xylophone

If it is really confusing you , you may want to consider paying the IFA for more advice, or ask the SJP advisor to help you.

Or try another IFA.....

https://adviserbook.co.uk/

Tick "confirmed independent" when the menu comes up and such other specialisms as you may require.

xylophone

With regard to the severance money, if you decide that you are going to live on it for a couple of years then you will need easy access.

https://moneyfacts.co.uk/savings-accounts/

DeadlyD

Albermarle said:

I am afraid pensions are not that simple, especially as you are looking for flexibility rather than a regular  income, and you will need to read all the links and posts carefully, probably more than once. Probably fair to say that simplicity is one of the advantages of a DB pension....
If you can understand the concept of pension crystallisation, I find then a lot of these other questions answer themselves.
Your pots are currently uncrystallised. Let's just look at one to keep it simple.
To take money from it, some or all of it needs to be crystallised.
So if you have £200K and want to take all the 25% tax free cash ( £50K) you have to crystallise the whole pension. 25% is paid as tax free cash and 75% ( £150K)  is then a crystallised pot. You can not take anymore tax free cash from a crystallised pot, and any money you take from this crystallised part is potentially taxable.
Now lets's say you only want £10K tax free cash. Then you have to crystallise £40K.
You end up with £10K tax free cash; £30K crystallised and £160K remains uncrystallised.
Then next time you want some money, you could take some from the £30K and maybe pay some tax on it OR crystallise some more of the still uncrystallised part, and just take some more tax free cash. 
OR as has been explained in a couple of pots, you can take some tax free cash and some taxable income at the same time.
If it is really confusing you , you may want to consider paying the IFA for more advice, or ask the SJP advisor to help you.

I see. A lot of reading up is required. But thank you for making some sense of this and giving me a head start so to speak.
I wouldn't want to take the whole 25% tax free sum upfront so the crystallising in parts makes more sense but I suppose that increases a management cost. Does the provider organise this crystallisation process?

DeadlyD

xylophone said:

If it is really confusing you , you may want to consider paying the IFA for more advice, or ask the SJP advisor to help you.

Or try another IFA.....

https://adviserbook.co.uk/

Tick "confirmed independent" when the menu comes up and such other specialisms as you may require.

Looks like I should take advice as there as so many options. 

Pat38493

DeadlyD said:

xylophone said:

If it is really confusing you , you may want to consider paying the IFA for more advice, or ask the SJP advisor to help you.

Or try another IFA.....

https://adviserbook.co.uk/

Tick "confirmed independent" when the menu comes up and such other specialisms as you may require.

Looks like I should take advice as there as so many options. 

Well if you tell the thread (or your adviser) your full situation - savings, net redundancy amount, pension assets, how they are currently invested, expected future income from new career, mortgage amount, and crucially how much money you need to live on for all future years, it will then be easier to suggest good options for how to take out the funds.  

Albermarle

DeadlyD said:

Albermarle said:

I am afraid pensions are not that simple, especially as you are looking for flexibility rather than a regular  income, and you will need to read all the links and posts carefully, probably more than once. Probably fair to say that simplicity is one of the advantages of a DB pension....
If you can understand the concept of pension crystallisation, I find then a lot of these other questions answer themselves.
Your pots are currently uncrystallised. Let's just look at one to keep it simple.
To take money from it, some or all of it needs to be crystallised.
So if you have £200K and want to take all the 25% tax free cash ( £50K) you have to crystallise the whole pension. 25% is paid as tax free cash and 75% ( £150K)  is then a crystallised pot. You can not take anymore tax free cash from a crystallised pot, and any money you take from this crystallised part is potentially taxable.
Now lets's say you only want £10K tax free cash. Then you have to crystallise £40K.
You end up with £10K tax free cash; £30K crystallised and £160K remains uncrystallised.
Then next time you want some money, you could take some from the £30K and maybe pay some tax on it OR crystallise some more of the still uncrystallised part, and just take some more tax free cash. 
OR as has been explained in a couple of pots, you can take some tax free cash and some taxable income at the same time.
If it is really confusing you , you may want to consider paying the IFA for more advice, or ask the SJP advisor to help you.

I see. A lot of reading up is required. But thank you for making some sense of this and giving me a head start so to speak.
I wouldn't want to take the whole 25% tax free sum upfront so the crystallising in parts makes more sense but I suppose that increases a management cost. Does the provider organise this crystallisation process?

Each pension will have different charging structures ( nothing is ever simple with this subject) As a big generalisation, the ones that charge more overall, usually do not have extra charges for other items. Whilst a low cost pension may charge for each withdrawal. However the charges will be a minor issue overall.
If you were doing it yourself ( without an IFA) you would inform the provider that you want to start withdrawing from the pension and how you would prefer to do it. They will tell you what is possible and how to do it. Most providers will also ask you quite a lot of questions as they are obliged to check that you know what you are doing, specifically that you realise if you take too much out too quickly, it might run out too quickly. They are covering themselves in case of any comeback later.