Pension draw-down or not

Herm50

Hi, I turn 60 next year and although I'm not planning on retiring just yet, I can start to draw-down from a pension. As this would take me over the 40% tax threshold ( combined salary and pension will be around £65k ), is it worth doing, or should I defer the pension draw-down until I retire?

NoMore

Do you need the money ? If not then little point in taking it, just because you can

dunstonh

Herm50 said:

Hi, I turn 60 next year and although I'm not planning on retiring just yet, I can start to draw-down from a pension. As this would take me over the 40% tax threshold ( combined salary and pension will be around £65k ), is it worth doing, or should I defer the pension draw-down until I retire?

You are asking if a potential solution is a good idea without actually telling us what your objective is.

Why are you considering drawing on the pension?  (i.e. to achieve what objective)

Herm50

I’m trying to determine if taking the pension at 60, and paying a higher rate of tax on it, is financially better or worse than deferring it for 2 years. If I deferred it for 2 years, there would be an estimated increases of £2k per year on the pension.

MallyGirl

it depends on what your plans are.
If the choice is

• take at 60 but pay 40% tax on some of it 

or

• defer for 2 years, retire so there is no other income, take the pension but stay under the 40% tax bracket and possibly even pay no tax if you can take under £16.6k of which 25% is TFLS and rest is taxable.

then I would say defer.

If you are planning to work till you get your state pension, then it depends on what other pension provision you have as to when is the most tax efficient time to start drawing on it.
You haven't given enough details

dunstonh

Herm50 said:

I’m trying to determine if taking the pension at 60, and paying a higher rate of tax on it, is financially better or worse than deferring it for 2 years. If I deferred it for 2 years, there would be an estimated increases of £2k per year on the pension.

Your title says drawdown.  Is this a defined contribution pension or a defined benefit pension? 
Drawdown applies to DC pensions but not DB pensions
However, your reference to deferring and increased income suggest DB pension (as it doesn't really work that way with DC pensions)

Pipthecat

Herm50 said:

I’m trying to determine if taking the pension at 60, and paying a higher rate of tax on it, is financially better or worse than deferring it for 2 years. If I deferred it for 2 years, there would be an estimated increases of £2k per year on the pension.

Do you need the money?  If not leave it invested.  Is the pension DC?  You may not want to trigger the MPAA if you are still working and could to look at the tax free element if you need the money.

squirrelpie

If you will not be taxed at 40% in your retirement, then deferring the drawdown until you retire seems obvious, unless you have a need for the money now. Why pay extra tax?

xylophone

Is this a Defined Benefit Pension with a Scheme Normal Pension Age of 60?

If you defer, there are "Late Retirement Increases" paid on the pension?

If you took the pension at age 60, regarding it as income replacement , you could consider paying sufficient from salary into a (eg) SIPP  so as to  take you out of higher rate tax?