Do I overpay my pension

I'm 56 this year and currently have 600k in defined contribution pensions. I have 30k in cash and 25k in shares. I also own a 2nd property (400k equity). I currently pay in £20k into my pension yearly.
I am married and have one child. I am thinking of retiring at 58. Spouse has own DC contribution pension.  I have full state.pension.


My questions are;
- In order to prepare for retirement, would you max out your pension contributions or would you start putting into an ISA?  

- Am I getting near the Lifetime Allowance, would I need to think about pulling down a cash lump sum? Would putting extra contributions in the pension and then getting a cash lump sum be another option.

Anything else  I need to think about.





Replies

  • edited 21 January at 12:14PM
    NedSNedS Forumite
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    edited 21 January at 12:14PM
    Do you have any other pension (DB / final salary pensions maybe?) If not, then with a DC pension pot of £600k and a planned retirement date in 2 years, I don't think you have to worry about the LTA assuming you are planning to start drawing upon the pension when you retire at 58. If it were to grow another 50% and get close to the LTA, you may want to consider crystallising it, but that is easily manageable and a nice problem to have.
    Are you currently a high rate tax payer? Do you expect to pay high rate tax in retirement, or do you think you can keep within basic rate tax.
    If you expect to only pay basic rate tax in retirement, I would max out pension contributions until you retire, paying in as much as you can each year, up to any relevant limits. As you are 55 years old, you are already old enough to access your pensions whenever you are ready to retire, so I do not see any need/advantage to use ISAs over pension at this point. I would take advantage of the tax relief on offer by using the pension wrapper.

  • FabtasiaFabtasia Forumite
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    I am a higher rate tax payer now. I'm probably on the borders of whether I will be retirement (leaming towards being able to keep under).

    Thank you for your thoughts. I dud wonder whether if it was in a pension, it would be more difficult for my child to inherit.
  • LintonLinton Forumite
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    Fabtasia said:
    I am a higher rate tax payer now. I'm probably on the borders of whether I will be retirement (leaming towards being able to keep under).

    Thank you for your thoughts. I dud wonder whether if it was in a pension, it would be more difficult for my child to inherit.
    A DC pension pot is not included in your estate when you die.  It will normally go to the person nominated in your Statement of Wishes unless the trustees consider your choice to be perverse.  So make sure that the Statement of Wishes is still correct.

    If you die before 75 the pension pot up to the LTA will go tax-free possibly simply as a cash lump sum to the beneficiary.  If it remains as a pension any withdrawals are tax free. After 75 it gets transferred to the beneficiary as a pension and subsequent withdfrawals are taxed as with any other pension.

    Pensions are one way for the seriously rich to protect some of their wealth. Hence the LTA test.
  • Pat38493Pat38493 Forumite
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    I would also vote for maxing out the pension given the information provided.

    If you are planning to retire in a couple of years, you may want to look at how the money is invested in the SIPP to make sure it's aligned with your retirement spending needs and risk tolerance.  (e.g. some people like to move some of the money wtihin the SIPP into safer investments or even cash, especially if you don't have any other guaranteed income like DB pensions).
  • edited 21 January at 1:59PM
    AlbermarleAlbermarle Forumite
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    edited 21 January at 1:59PM
    Fabtasia said:
    I'm 56 this year and currently have 600k in defined contribution pensions. I have 30k in cash and 25k in shares. I also own a 2nd property (400k equity). I currently pay in £20k into my pension yearly.
    I am married and have one child. I am thinking of retiring at 58. Spouse has own DC contribution pension.  I have full state.pension.


    My questions are;
    - In order to prepare for retirement, would you max out your pension contributions or would you start putting into an ISA?  

    - Am I getting near the Lifetime Allowance, would I need to think about pulling down a cash lump sum? Would putting extra contributions in the pension and then getting a cash lump sum be another option.

    Anything else  I need to think about.





    The two posts above sum up the situation nicely. Keep filling up your pension whilst still working.

    Only thing I would add, is that are you happy that this large pension pot is invested appropriately for your situation/age/ planned withdrawal strategy?
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