Do I overpay my pension
in Pensions, annuities & retirement planning
5 replies 298 views
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.
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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.
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.
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).
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?