Tax avoidance

kevhky1968

Dazed_and_C0nfused said:

kevhky1968 said:

QrizB said:

kevhky1968 said:

Why is it reccomended to leave if not required ?
I intend taking it and putting it into a 2 year fixed 5% ISA

Because it's likely to do better than 5% inside your pension (depending of course on how you have invested it).

Investments currently are on a rolleracoaster at lesst I'd be guaranteed 5% seems a wise move to me

Don't forget when you take the 25% TFLS up front you crystallise the rest of your pot so 100% of that crystallised fund is taxable when taken out of the pension.

So your saying the remainder of the pot after I've took the TFLS  is taxable even if it is taken as draw down and below the personal tax free allowance

Dazed_and_C0nfused

kevhky1968 said:

Dazed_and_C0nfused said:

kevhky1968 said:

QrizB said:

kevhky1968 said:

Why is it reccomended to leave if not required ?
I intend taking it and putting it into a 2 year fixed 5% ISA

Because it's likely to do better than 5% inside your pension (depending of course on how you have invested it).

Investments currently are on a rolleracoaster at lesst I'd be guaranteed 5% seems a wise move to me

Don't forget when you take the 25% TFLS up front you crystallise the rest of your pot so 100% of that crystallised fund is taxable when taken out of the pension.

So your saying the remainder of the pot after I've took the TFLS  is taxable even if it is taken as draw down and below the personal tax free allowance

Yes, the 25% TFLS is tax exempt but the remainder is taxable income.

Being below the Personal Allowance doesn't stop it being taxable income.  Just like earnings below the Personal Allowance are still taxable.

Say you have a pot of £100k and take £25k TFLS up front leaving £75k crystallised.  Then that £75k grows to say £90k.  The whole £90k will be taxable income (when taken out of the pension).

NoMore

Being taxable is not the same as you will pay tax.

kevhky1968

NoMore said:

Being taxable is not the same as you will pay tax.

Got you thanks 👍

Sea_Shell

Dazed_and_C0nfused said:

kevhky1968 said:

Dazed_and_C0nfused said:

kevhky1968 said:

QrizB said:

kevhky1968 said:

Why is it reccomended to leave if not required ?
I intend taking it and putting it into a 2 year fixed 5% ISA

Because it's likely to do better than 5% inside your pension (depending of course on how you have invested it).

Investments currently are on a rolleracoaster at lesst I'd be guaranteed 5% seems a wise move to me

Don't forget when you take the 25% TFLS up front you crystallise the rest of your pot so 100% of that crystallised fund is taxable when taken out of the pension.

So your saying the remainder of the pot after I've took the TFLS  is taxable even if it is taken as draw down and below the personal tax free allowance

Yes, the 25% TFLS is tax exempt but the remainder is taxable income.

Being below the Personal Allowance doesn't stop it being taxable income.  Just like earnings below the Personal Allowance are still taxable.

Say you have a pot of £100k and take £25k TFLS up front leaving £75k crystallised.  Then that £75k grows to say £90k.  The whole £90k will be taxable income (when taken out of the pension).

Isn't that a zero sum game though?!?    If you had both sets of money invested in the same funds, and either took the 25% upfront or left it within the pension, then 75% is STILL taxable upon withdrawal.

Albermarle

kevhky1968 said:

Albermarle said:

kevhky1968 said:

Dazed_and_C0nfused said:

kevhky1968 said:

"So if you have (taxable) pension income of £10,000 and no other income then you won't have any tax to pay on it"

That's the plan I won't have any other income only the 10k per annum draw down so your saying I won't pay tax on it ?

I'm 55 in December 23, I intend to drawdown until age 67 when my state pension will then kick in.

I also have 2 other pensions which I ain't planning on touching yet and also have quite a substantial amount in savings

Thanks

Don't forget it's the whole tax year that counts so in 2023-24 you might have some earnings to factor in?

Yeah I get that regards to the whole tax year, so basically I'll take the 25% tax free lump and leave the drawdown until I leave work and start a new tax year then start the drawdown whereas if I start the drawdown now I'll pay tax as I'm still employed.

"Regarding taking the 25% tax free, it is normally recommended to only take this if you really need it for something specific. Otherwise it is usually better just to leave it in the pension until later."

Why is it reccomended to leave if not required ?
I intend taking it and putting it into a 2 year fixed 5% ISA

Often people take out the tax free cash because they can, and have no plan what to do with it. In this case you do have a plan.

Investments currently are on a rolleracoaster at lesst I'd be guaranteed 5% seems a wise move to me

You are not the only one converting investments to cash whilst interest rates are quite good, and now matching inflation. 
However in the long term, it is highly likely that most mainstream investments will beat cash savings. 
Most people are better off with a mixture of cash and investments. Cash for the short term and investments for the long term.

By the way Investments are always on a rollercoaster. Although currently things are rather stable/going up slowly, so less of a rollercoaster than many other periods. A typical medium risk portfolio is up around 5% in 2023. 

Pat38493

Albermarle said:

kevhky1968 said:

Albermarle said:

kevhky1968 said:

Dazed_and_C0nfused said:

kevhky1968 said:

"So if you have (taxable) pension income of £10,000 and no other income then you won't have any tax to pay on it"

That's the plan I won't have any other income only the 10k per annum draw down so your saying I won't pay tax on it ?

I'm 55 in December 23, I intend to drawdown until age 67 when my state pension will then kick in.

I also have 2 other pensions which I ain't planning on touching yet and also have quite a substantial amount in savings

Thanks

Don't forget it's the whole tax year that counts so in 2023-24 you might have some earnings to factor in?

Yeah I get that regards to the whole tax year, so basically I'll take the 25% tax free lump and leave the drawdown until I leave work and start a new tax year then start the drawdown whereas if I start the drawdown now I'll pay tax as I'm still employed.

"Regarding taking the 25% tax free, it is normally recommended to only take this if you really need it for something specific. Otherwise it is usually better just to leave it in the pension until later."

Why is it reccomended to leave if not required ?
I intend taking it and putting it into a 2 year fixed 5% ISA

Often people take out the tax free cash because they can, and have no plan what to do with it. In this case you do have a plan.

Investments currently are on a rolleracoaster at lesst I'd be guaranteed 5% seems a wise move to me

You are not the only one converting investments to cash whilst interest rates are quite good, and now matching inflation. 
However in the long term, it is highly likely that most mainstream investments will beat cash savings. 
Most people are better off with a mixture of cash and investments. Cash for the short term and investments for the long term.

By the way Investments are always on a rollercoaster. Although currently things are rather stable/going up slowly, so less of a rollercoaster than many other periods. A typical medium risk portfolio is up around 5% in 2023. 

As of today, my investments on a year to date basis have made more than 5% in 2023, so right now the statement that it's better to have the money in cash in this year is no longer true (although it would have been a few weeks ago).  Point being that equity investment growth can take off quite quickly when a recovery comes, and plenty will be caught out having moved more into cash.  That said, I have moved more than 20% of my funds into money market but that is mainly because I plan to access it within next 18 months.

In fact my employer default scheme has made 8.9% year to date (after removing the sum of contributions made so the real % is probably even a bit higher than that).

kevhky1968

Pat38493 said:

Albermarle said:

kevhky1968 said:

Albermarle said:

kevhky1968 said:

Dazed_and_C0nfused said:

kevhky1968 said:

"So if you have (taxable) pension income of £10,000 and no other income then you won't have any tax to pay on it"

That's the plan I won't have any other income only the 10k per annum draw down so your saying I won't pay tax on it ?

I'm 55 in December 23, I intend to drawdown until age 67 when my state pension will then kick in.

I also have 2 other pensions which I ain't planning on touching yet and also have quite a substantial amount in savings

Thanks

Don't forget it's the whole tax year that counts so in 2023-24 you might have some earnings to factor in?

Yeah I get that regards to the whole tax year, so basically I'll take the 25% tax free lump and leave the drawdown until I leave work and start a new tax year then start the drawdown whereas if I start the drawdown now I'll pay tax as I'm still employed.

"Regarding taking the 25% tax free, it is normally recommended to only take this if you really need it for something specific. Otherwise it is usually better just to leave it in the pension until later."

Why is it reccomended to leave if not required ?
I intend taking it and putting it into a 2 year fixed 5% ISA

Often people take out the tax free cash because they can, and have no plan what to do with it. In this case you do have a plan.

Investments currently are on a rolleracoaster at lesst I'd be guaranteed 5% seems a wise move to me

You are not the only one converting investments to cash whilst interest rates are quite good, and now matching inflation. 
However in the long term, it is highly likely that most mainstream investments will beat cash savings. 
Most people are better off with a mixture of cash and investments. Cash for the short term and investments for the long term.

By the way Investments are always on a rollercoaster. Although currently things are rather stable/going up slowly, so less of a rollercoaster than many other periods. A typical medium risk portfolio is up around 5% in 2023. 

As of today, my investments on a year to date basis have made more than 5% in 2023, so right now the statement that it's better to have the money in cash in this year is no longer true (although it would have been a few weeks ago).  Point being that equity investment growth can take off quite quickly when a recovery comes, and plenty will be caught out having moved more into cash.  That said, I have moved more than 20% of my funds into money market but that is mainly because I plan to access it within next 18 months.

In fact my employer default scheme has made 8.9% year to date (after removing the sum of contributions made so the real % is probably even a bit higher than that).

Thanks for the info all

As of today, my investments on a year to date basis have made more than 5% in 2023

Just out of curiosity who or where are your investments with.

Thanks

Pat38493

kevhky1968 said:

Pat38493 said:

Albermarle said:

kevhky1968 said:

Albermarle said:

kevhky1968 said:

Dazed_and_C0nfused said:

kevhky1968 said:

"So if you have (taxable) pension income of £10,000 and no other income then you won't have any tax to pay on it"

That's the plan I won't have any other income only the 10k per annum draw down so your saying I won't pay tax on it ?

I'm 55 in December 23, I intend to drawdown until age 67 when my state pension will then kick in.

I also have 2 other pensions which I ain't planning on touching yet and also have quite a substantial amount in savings

Thanks

Don't forget it's the whole tax year that counts so in 2023-24 you might have some earnings to factor in?

Yeah I get that regards to the whole tax year, so basically I'll take the 25% tax free lump and leave the drawdown until I leave work and start a new tax year then start the drawdown whereas if I start the drawdown now I'll pay tax as I'm still employed.

"Regarding taking the 25% tax free, it is normally recommended to only take this if you really need it for something specific. Otherwise it is usually better just to leave it in the pension until later."

Why is it reccomended to leave if not required ?
I intend taking it and putting it into a 2 year fixed 5% ISA

Often people take out the tax free cash because they can, and have no plan what to do with it. In this case you do have a plan.

Investments currently are on a rolleracoaster at lesst I'd be guaranteed 5% seems a wise move to me

You are not the only one converting investments to cash whilst interest rates are quite good, and now matching inflation. 
However in the long term, it is highly likely that most mainstream investments will beat cash savings. 
Most people are better off with a mixture of cash and investments. Cash for the short term and investments for the long term.

By the way Investments are always on a rollercoaster. Although currently things are rather stable/going up slowly, so less of a rollercoaster than many other periods. A typical medium risk portfolio is up around 5% in 2023. 

As of today, my investments on a year to date basis have made more than 5% in 2023, so right now the statement that it's better to have the money in cash in this year is no longer true (although it would have been a few weeks ago).  Point being that equity investment growth can take off quite quickly when a recovery comes, and plenty will be caught out having moved more into cash.  That said, I have moved more than 20% of my funds into money market but that is mainly because I plan to access it within next 18 months.

In fact my employer default scheme has made 8.9% year to date (after removing the sum of contributions made so the real % is probably even a bit higher than that).

Thanks for the info all

As of today, my investments on a year to date basis have made more than 5% in 2023

Just out of curiosity who or where are your investments with.

Thanks

The default employer scheme I mentioned is Aegon MI Savings (H) ARC - it's an Aegon only blended fund I think with about 82% equities.  I am using the Royal London money market fund for money market investments.

This Aegon fund seems to have done unexpectedly well this year for some reason, but of course that doesn't mean it will do the same next year.  Not stellar but better than I expected given the current market conditions.

I also have an interactive investor pension with also some Royal Money Market and the rest is in a mix of:
- Vanguard FTSE Global all cap
- HSBC FTSE All world (these first 2 overlap with each other for historic reason - if investing today I would put it all in the HSBC one).
- Vanguard Emerging Markets
- Vanguard Global Small Cap
These are all low cost tracker funds.  I might be a bit too heavy in emerging markets but time will tell.

Grumpy_chap

kevhky1968 said:

Investments currently are on a rolleracoaster at lesst I'd be guaranteed 5% seems a wise move to me

You can have cash investments within a pension wrapper also.