Bold leap into retirement

GenX0212

MetaPhysical said:

m_c_s said:

MetaPhysical said:

Smudgeismydog said:

HUSKYPAL said:

@Smudgeismydog - Have to say, this is the most helpful and useful forum I've found anywhere on the web for real world numbers and information. Very refreshing to have a community of like minded people with a simple objective to help each other navigate what can be a tricky decision, and to see what's likely on the other side. Thanks for starting it. I'd love to see some more updates from earlier posters as to how their plans/finances have panned out over time. My end date keeps creeping forward, now looking at June 27, but could be sooner, work motivation sinking below basement level...

Hello early posters;

@leosayer, @MetaPhysical, @savingmore, @Daffodil1234, @handful, @squashtraveller , @AliBee16, @cloud_dog

Do you fancy letting us know how you are getting on?

I am retiring just before Christmas on the 19th December and will be 58 and four months.  Because I have been saving heavily into my pension this tax year I do not want to trigger MPAA and so need to live very frugally until April 2026 new tax year when all my pensions will kick in and be accessible to me.  My last pay day will be in December.  

My understanding is MPAA does not impact what you put into your pension before you start taking money out of your pension. So you can take money out in Jan and then the MPAA rules will kick in for the rest of the tax year.

Not so.  If you make a taxable withdrawal such as an UFPLS from a DC pot then you trigger MPAA and are limited to £10k contributions for that year and I have so far made £14000 of contributions.  So if I were to make an UFPLS withdrawal in January then this would trigger MPAA.  I could take a tax free lump sum  but I don't want to do that as it would mean I would move money into drawdown.  I want to to take my money, certainly for now, as UFPLS.

I wasn't aware of this, it might affect how I need to think about accessing my pensions when I retire next year. 

Does the £10k include employer contributions and salary sacrificed contributions? Do you have a link/source for the rule? Thanks.

MetaPhysical

It doesn't matter how the contribution was made.  If more than £10k of contributions to your DC pot are made via SalSac, employer, tax relief or whatever (SIPP or company personal pension - it doesn't matter), then you face the MPAA charge if you make a taxable withdrawal in the same tax year. So in my case if I were to take a UFPLS this tax year, and because I have contributed more than £10K (£14k), I would face a tax charge on the £4k overspill.  That's why I am not going to access this SIPP until April 26 next tax year.  I could take some tax free cash but I don't want to do that as I explained before - I do not want to move money into drawdown.

https://techzone.aberdeenadviser.com/public/pensions/Technical-Guide-Pensions-UFPLS

kempiejon

MetaPhysical said:

I am retiring just before Christmas on the 19th December and will be 58 and four months.  Because I have been saving heavily into my pension this tax year I do not want to trigger MPAA and so need to live very frugally until April 2026 new tax year when all my pensions will kick in and be accessible to me.  My last pay day will be in December.  

We all manage our cash flows differently but I'd take a view that for around 5 months there'd be no need to reduce quality of life to very frugal or even tighten my belt, cut luxuries. It's only 4 or 5 months I'd cast about for a handful of interest free credit cards, one can often find well over a year of free credit. But I'm a stoozer so used to using banks money to enrich my life. It'd be a shame to start retirement poor as a church mouse with all that money just out of reach.

GenX0212

MetaPhysical said:

It doesn't matter how the contribution was made.  If more than £10k of contributions to your DC pot are made via SalSac, employer, tax relief or whatever (SIPP or company personal pension - it doesn't matter), then you face the MPAA charge if you make a taxable withdrawal in the same tax year. So in my case if I were to take a UFPLS this tax year, and because I have contributed more than £10K (£14k), I would face a tax charge on the £4k overspill.  That's why I am not going to access this SIPP until April 26 next tax year.  I could take some tax free cash but I don't want to do that as I explained before - I do not want to move money into drawdown.

https://techzone.aberdeenadviser.com/public/pensions/Technical-Guide-Pensions-UFPLS

This would seem to imply otherwise?

"In the first tax year that the money purchase annual allowance applies, it is only pension input amounts for money purchase arrangements that occur following the date of the trigger event that are measured against the money purchase annual allowance test"

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm056540

The two example scenarios provided are over complicated though and my brain isn't managing to strip them back to the basics.

NoMore

If you trigger the mpaa it only applies from that date forward. It does not retroactively apply to previous contributions. So yes you can put more than 10k in before triggering the mpaa in the same tax year. 

Storcko14

GenX0212 said:

MetaPhysical said:

It doesn't matter how the contribution was made.  If more than £10k of contributions to your DC pot are made via SalSac, employer, tax relief or whatever (SIPP or company personal pension - it doesn't matter), then you face the MPAA charge if you make a taxable withdrawal in the same tax year. So in my case if I were to take a UFPLS this tax year, and because I have contributed more than £10K (£14k), I would face a tax charge on the £4k overspill.  That's why I am not going to access this SIPP until April 26 next tax year.  I could take some tax free cash but I don't want to do that as I explained before - I do not want to move money into drawdown.

https://techzone.aberdeenadviser.com/public/pensions/Technical-Guide-Pensions-UFPLS

This would seem to imply otherwise?

"In the first tax year that the money purchase annual allowance applies, it is only pension input amounts for money purchase arrangements that occur following the date of the trigger event that are measured against the money purchase annual allowance test"

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm056540

The two example scenarios provided are over complicated though and my brain isn't managing to strip them back to the basics

That's poor from Aberdeen - but until recently they couldn't spell so...

Reading that I can see why you thought that you are limited to £10k for this tax year if you trigger MPAA before April 5.  I checked the same scenario with my provider (ii) last week and found the correct position here:

 https://www.ii.co.uk/pensions/contributions/mpaa-triggers

m_c_s

GenX0212 said:

MetaPhysical said:

It doesn't matter how the contribution was made.  If more than £10k of contributions to your DC pot are made via SalSac, employer, tax relief or whatever (SIPP or company personal pension - it doesn't matter), then you face the MPAA charge if you make a taxable withdrawal in the same tax year. So in my case if I were to take a UFPLS this tax year, and because I have contributed more than £10K (£14k), I would face a tax charge on the £4k overspill.  That's why I am not going to access this SIPP until April 26 next tax year.  I could take some tax free cash but I don't want to do that as I explained before - I do not want to move money into drawdown.

https://techzone.aberdeenadviser.com/public/pensions/Technical-Guide-Pensions-UFPLS

This would seem to imply otherwise?

"In the first tax year that the money purchase annual allowance applies, it is only pension input amounts for money purchase arrangements that occur following the date of the trigger event that are measured against the money purchase annual allowance test"

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm056540

The two example scenarios provided are over complicated though and my brain isn't managing to strip them back to the basics.

This is exactly how it works. As I said in my earlier post you can start drawdown to take income in Jan 2026 and the MPAA rule does not impact you. 
So no need to live very frugally for a few months   

m_c_s

MetaPhysical said:

Not so.  If you make a taxable withdrawal such as an UFPLS from a DC pot then you trigger MPAA and are limited to £10k contributions for that year and I have so far made £14000 of contributions.  So if I were to make an UFPLS withdrawal in January then this would trigger MPAA.  I could take a tax free lump sum  but I don't want to do that as it would mean I would move money into drawdown.  I want to to take my money, certainly for now, as UFPLS.

That is not how the MPAA rules work. It is only triggered on the date that you first take income from your DC pension. So only contributions after that date are subject to MPAA rules in the same financial year.

Cobbler_tone

MetaPhysical said:

Smudgeismydog said:

HUSKYPAL said:

@Smudgeismydog - Have to say, this is the most helpful and useful forum I've found anywhere on the web for real world numbers and information. Very refreshing to have a community of like minded people with a simple objective to help each other navigate what can be a tricky decision, and to see what's likely on the other side. Thanks for starting it. I'd love to see some more updates from earlier posters as to how their plans/finances have panned out over time. My end date keeps creeping forward, now looking at June 27, but could be sooner, work motivation sinking below basement level...

Hello early posters;

@leosayer, @MetaPhysical, @savingmore, @Daffodil1234, @handful, @squashtraveller , @AliBee16, @cloud_dog

Do you fancy letting us know how you are getting on?

 I'm recovering from that but life without private medical cover is something I approach with trepidation, especially with my right hip.  I may explore options for buying my own cover (which I know won't cover that hip).

That is a good benefit but you might find the policies expensive, easily racking up £5k a year and then you'll have excesses and restrictions. Personal choice, but it may be a better option to self fund. You have a good income and cash in the bank, anything from a few grand to maybe £15k for a major op like a hip replacement could be money well spent, that fingers crossed you never have to. I have regular injections via BUPA which are around £1,500 a time. I will do a combination of self funding and NHS, as the consultant (the same either way) has told me it takes 18 months on the NHS to get one. 
If you have money, spending it on maintaining and improving your health is money well spent IMO. 

MetaPhysical

Thanks all for the correction and @GenX0212 I am sorry if what I said misled you! 

This is great if so!   So let me recap:  So I have saved £14k into my pension so far this tax year.   If I take an UFPLS before the end of this tax year then I am limited to £10k for the remainder of this tax year since the UFPLS would have triggered MPAA?  After taking the UFPLS I am limited to £10k forever afterwards per year in contributions.

The £14k I have saved is not yet in my "main" SIPP that I will be taking the UFPLS from, it is still in my works pension that I will move over to my SIPP after I have retired and i will commence that move immediately after I have retired (before taking an UFPLS from my main SIPP.)  That should not affect the rules should it?

This is still very relevant discussion for the Bold Leap thread. I am sure many others may face a similar question.