Three years before retirement. Finalising my DIY Passive plan.

Audaxer

RichardS said:

NoMore said:

RichardS said:

That’s a good point as I don’t really know whether I would start drawing my tax free amount (the £16.7k)  from my pension at 60 or whether I would put this off for 2 or 3 years and use up my ISA during that period and only start drawing from the pension when the ISA funds have been depleted.  Which approach is best or would it be a combination of the two?

Cloud_dog has already covered this:

cloud_dog said:

With regards to drawdown, you should at least (in my opinion) draw the maximum you can to utilise your Personal Allowance, so under a UPFLS arrangement £16760pa (personal allowance £12570 (75% taxable component) and  £4190 (25% TFLS component).

No point drawing from your ISA's if your leaving Personal Allowance on the table.

Ahh I see thank you!

I agree it's best to draw from your pension first to use your tax free allowance over these 3 years. However when you drawdown the £16,760 each year, in your situation I would immediately reinvest it in the same or similar risk level funds within a new S&S ISA. For your income from ages 60-63, you could convert your existing S&S ISA to a Cash ISA paying decent interest, rather than risk leaving it invested for these 3 years as you will be using most of it for income.

Hoenir

RichardS said:

What I struggle with is the consolidation of the two pensions now. I’d be moving £203k into the Scottish Windows workplace pension (which looks to me like a 60/40 allocation split approx).  Is this any better than my original plan of moving it onto the ii platform with very low fees and selecting the HSBC Global Strategy funds - maybe half in Dynamic and half in Adventurous?  Would this part of my pot have more chance of growth if I did this rather than consolidate?  (Especially as the ii fixed fees work well if I have my ISA on there as well)

The obvious danger with a more aggressive portfolio is that the "growth" doesn't materialise over a short time frame. You've a relatively time window in which to accumulate further capital. How much capital can you afford to lose in the next decade. While there's much broad debate over the merits of a 60/40 portfolio. It does provide the basis for a more balanced approach in the medium term. With Government bonds , for example, again offering a fairly decent positive return. When compared to what equities might return given projections for global growth in the immediate future. There's also the burden of higher interest rates to consider. As these will continue to percolate through the company sector for a lot longer yet. Hitting straight to the bottom line in the form of lower profitability. 

RichardS

Audaxer said:

RichardS said:

NoMore said:

RichardS said:

That’s a good point as I don’t really know whether I would start drawing my tax free amount (the £16.7k)  from my pension at 60 or whether I would put this off for 2 or 3 years and use up my ISA during that period and only start drawing from the pension when the ISA funds have been depleted.  Which approach is best or would it be a combination of the two?

Cloud_dog has already covered this:

cloud_dog said:

With regards to drawdown, you should at least (in my opinion) draw the maximum you can to utilise your Personal Allowance, so under a UPFLS arrangement £16760pa (personal allowance £12570 (75% taxable component) and  £4190 (25% TFLS component).

No point drawing from your ISA's if your leaving Personal Allowance on the table.

Ahh I see thank you!

I agree it's best to draw from your pension first to use your tax free allowance over these 3 years. However when you drawdown the £16,760 each year, in your situation I would immediately reinvest it in the same or similar risk level funds within a new S&S ISA. For your income from ages 60-63, you could convert your existing S&S ISA to a Cash ISA paying decent interest, rather than risk leaving it invested for these 3 years as you will be using most of it for income.

Thanks for this. I just want to make sure I am understanding. Let’s just say I feel I need around £16,760 a year to survive. I think what you’re saying is that during those first few years (60-63 or whatever) even though my ISA might be worth enough to get me through, I’m actually better off taking that £16,760 from the pension each year. Are you suggesting that’s what I use for my living expenses and I leave the ISA alone or are you saying I would actually use the ISA for expenses but re-invest the pension withdrawal into the ISA at the same time? Sorry for lack of knowledge here, just trying to understand and I really appreciate your help. 

Albermarle

RichardS said:

Audaxer said:

RichardS said:

NoMore said:

RichardS said:

That’s a good point as I don’t really know whether I would start drawing my tax free amount (the £16.7k)  from my pension at 60 or whether I would put this off for 2 or 3 years and use up my ISA during that period and only start drawing from the pension when the ISA funds have been depleted.  Which approach is best or would it be a combination of the two?

Cloud_dog has already covered this:

cloud_dog said:

With regards to drawdown, you should at least (in my opinion) draw the maximum you can to utilise your Personal Allowance, so under a UPFLS arrangement £16760pa (personal allowance £12570 (75% taxable component) and  £4190 (25% TFLS component).

No point drawing from your ISA's if your leaving Personal Allowance on the table.

Ahh I see thank you!

I agree it's best to draw from your pension first to use your tax free allowance over these 3 years. However when you drawdown the £16,760 each year, in your situation I would immediately reinvest it in the same or similar risk level funds within a new S&S ISA. For your income from ages 60-63, you could convert your existing S&S ISA to a Cash ISA paying decent interest, rather than risk leaving it invested for these 3 years as you will be using most of it for income.

Thanks for this. I just want to make sure I am understanding. Let’s just say I feel I need around £16,760 a year to survive. I think what you’re saying is that during those first few years (60-63 or whatever) even though my ISA might be worth enough to get me through, I’m actually better off taking that £16,760 from the pension each year. That is correct  Are you suggesting that’s what I use for my living expenses and I leave the ISA alone or are you saying I would actually use the ISA for expenses but re-invest the pension withdrawal into the ISA at the same time? Sorry for lack of knowledge here, just trying to understand and I really appreciate your help. 

The important answer is in bold .

On the other points, it is more a case of fine tuning. I guess most people would just use the £16760 for living expenses and leave the ISA alone, as that would be more simple.

RichardS

@Albermarle thank you. I guess that leads me to think that my ISA is not then a short term 3 year investment but might stay invested longer.  I am transferring this to ii and have not yet decided on funds. I had been thinking of a money market fund or something assuming I might be needing this money in 3 years. But if in 3 years I use the pension then the ISA becomes a slightly more long term thing. 

Albermarle

RichardS said:

@Albermarle thank you. I guess that leads me to think that my ISA is not then a short term 3 year investment but might stay invested longer.  I am transferring this to ii and have not yet decided on funds. I had been thinking of a money market fund or something assuming I might be needing this money in 3 years. But if in 3 years I use the pension then the ISA becomes a slightly more long term thing. 

Yes, although 3 years is still relatively short term in investing terms, but I guess you would take it over a longer period anyway.
I do not know if you have cash savings outside the S&S ISA + pension, as this can affect your strategy as well.

RichardS

Albermarle said:

RichardS said:

@Albermarle thank you. I guess that leads me to think that my ISA is not then a short term 3 year investment but might stay invested longer.  I am transferring this to ii and have not yet decided on funds. I had been thinking of a money market fund or something assuming I might be needing this money in 3 years. But if in 3 years I use the pension then the ISA becomes a slightly more long term thing. 

Yes, although 3 years is still relatively short term in investing terms, but I guess you would take it over a longer period anyway.
I do not know if you have cash savings outside the S&S ISA + pension, as this can affect your strategy as well.

Yes in fact I would be looking to have a cash buffer for a couple of years so I expect I would probably use the ISA for this, in which case it probably is a case of putting it in cash or money markets or something.  Thanks again for your input. 

MK62

If your wife is not expecting to retire until she is 67 and earns more than £12570 pa, then once you retire, and until she retires, it may be more tax efficient overall for you to transfer 10% of your PA to her, reduce your pension withdrawal to £15k (to match your UFPLS to your new lower PA) and top up any shortfall from your ISA. As a couple, it'd save you up to £251pa in income tax. 

Audaxer

RichardS said:

Audaxer said:

RichardS said:

NoMore said:

RichardS said:

That’s a good point as I don’t really know whether I would start drawing my tax free amount (the £16.7k)  from my pension at 60 or whether I would put this off for 2 or 3 years and use up my ISA during that period and only start drawing from the pension when the ISA funds have been depleted.  Which approach is best or would it be a combination of the two?

Cloud_dog has already covered this:

cloud_dog said:

With regards to drawdown, you should at least (in my opinion) draw the maximum you can to utilise your Personal Allowance, so under a UPFLS arrangement £16760pa (personal allowance £12570 (75% taxable component) and  £4190 (25% TFLS component).

No point drawing from your ISA's if your leaving Personal Allowance on the table.

Ahh I see thank you!

I agree it's best to draw from your pension first to use your tax free allowance over these 3 years. However when you drawdown the £16,760 each year, in your situation I would immediately reinvest it in the same or similar risk level funds within a new S&S ISA. For your income from ages 60-63, you could convert your existing S&S ISA to a Cash ISA paying decent interest, rather than risk leaving it invested for these 3 years as you will be using most of it for income.

Thanks for this. I just want to make sure I am understanding. Let’s just say I feel I need around £16,760 a year to survive. I think what you’re saying is that during those first few years (60-63 or whatever) even though my ISA might be worth enough to get me through, I’m actually better off taking that £16,760 from the pension each year. Are you suggesting that’s what I use for my living expenses and I leave the ISA alone or are you saying I would actually use the ISA for expenses but re-invest the pension withdrawal into the ISA at the same time? Sorry for lack of knowledge here, just trying to understand and I really appreciate your help. 

I was suggesting reinvesting the annual pension withdrawal into a new S&S ISA might be best. That is because I think for your 3 years income, you would get a better cash savings rate outside of the pension by transferring the S&S ISA to a Cash ISA. The main thing is to use your annual personal tax allowance by drawing down the £16,760 each tax year, and in my view have your 3 years income in cash savings rather than having both your pension and S&S ISA fully invested.

NlghtOwl

Move the non work pensions now into ii (or your chosen platform), this will give you chance to set it up and understand the platform before you finally move your workplace pension.
Just double check there are no reductions or limitations on moving the pensions.