Pension Pot Drawdown Or Not?

eric4395

jamesd said:

Dunstonh was looking at your total investable assets and calculating the overall equity percentage, which is a sensible way to do it.

There are some guidelines which suggest that £875,000 could provide you with 30 years of £28,000 a year extra income, increasing with inflation every year. In a repeat of the worst historic UK investment performance nothing would be left at the end but a substantial amount is more likely, as is dying before the thirty years is up.

To increase guaranteed income you could defer your state pensions and draw down investments instead. It'll increase by 5.8% for each year deferred, pro-rated for less.

Quite a few regular posters here including me would wonder whether spending more could improve your quality of life. A world cruise or two, perhaps.

For inheritance planning one of the best things you can do is give while alive. £2880 net of pension contributions to grandchildren and children perhaps plus LISA. For those with a stable housing need it can be very good to help buy a flat instead of renting.

"Quite a few regular posters here including me would wonder whether spending more could improve your quality of life. A world cruise or two, perhaps.". 

Get what you are saying but we do about 3/4 cruises or hotel holidays a year and have done for some time ,we prefer it this way and never have much inclination to go away more than 14 days, a world cruise would kill me all that food & drink 🤣 
We have also took our 2 grandsons on a Carribean cruise from Florida and went to Universal Studios for a week as well, also took  our  family of 9 to Cyprus last year on an all inclusive holiday including golf for 4 of us.
We will prob do something similar again maybe next year (hopefully )
So no need to wonder about us spending more on hols etc.. We don't deprive ourselves.
As I said prev the main point or query was the viewpoint in taking my tax-free cash now or leaving it for the time being.

jamesd

If not spending it then best to leave it in the pension. 

Bostonerimus1

eric4395 said:

Bostonerimus1 said:

I think you need to decide your ultimate goals. ie do you want to go on lots of holidays and spend your money or do you want to leave a large legacy to charities or your children. If it's the latter then keeping money inside the pensions seems sensible to reduce IHT issues, at least for the children, and your current exposure to income tax. If you can leave things to grow tax free for as long as possible it's often a good thing. Of course the devil will be in the details of tax rates and timing of withdrawals.

So decide what you want and come up with a plan. In tax management scenarios like your own you would need to set up a spreadsheet with the relevant tax rates and possible investment returns and go over a number of scenarios, or it might be easier to employ a tax specialist.

 We intend to do both I think the money we have available cash wise is enough for us to go as many holidays as we wish or spend as we wish  and also my pension pot is a very decent sum to leave to my family, if we need to access it in later life and are still able to go holidays then that is when I would prob look at taking some of the tax free portion from my pension. My original query was should I take the tax free sum every year over the next few years but opinion seems to be against that.

So if you can do everything you want using funds outside of the pension don't drawdown any of it just yet as your tax free portion is basically acting as an ISA. Keep an eye on your age and health and net worth for potential IHT issues. There might come a time when you have headroom to take the pension tax free lump sum and that might work out best from an overall tax perspective. I think you should definitely think about gifts to family and charities and put that in your budget.

Hal17

Thanks eric4395 for your original post. This was very interesting for me as both your family details and financial position are almost exactly the same as my current situation. 

I have my pension pot in Royal London General Portfolio 5, although I have already taken the 25% tax free sum and given it to my son and daughter and 2 Grandchildren. 

I look forward to reading all the replies.

Bostonerimus1

Hal17 said:

Thanks eric4395 for your original post. This was very interesting for me as both your family details and financial position are almost exactly the same as my current situation. 

I have my pension pot in Royal London General Portfolio 5, although I have already taken the 25% tax free sum and given it to my son and daughter and 2 Grandchildren. 

I look forward to reading all the replies.

What are the IHT and gift tax implications of that?

Hal17

Bostonerimus1 said:

Hal17 said:

Thanks eric4395 for your original post. This was very interesting for me as both your family details and financial position are almost exactly the same as my current situation. 

I have my pension pot in Royal London General Portfolio 5, although I have already taken the 25% tax free sum and given it to my son and daughter and 2 Grandchildren. 

I look forward to reading all the replies.

What are the IHT and gift tax implications of that?

I did this about 2 years ago. I am aware of the 7 year rule on IHT, but other than that I I guess I didn't give it much thought to be honest. 

eric4395

Hal17 said:

Thanks eric4395 for your original post. This was very interesting for me as both your family details and financial position are almost exactly the same as my current situation. 

I have my pension pot in Royal London General Portfolio 5, although I have already taken the 25% tax free sum and given it to my son and daughter and 2 Grandchildren. 

I look forward to reading all the replies.

Yes that's interesting you have already used your tax free sum.
RL have sent me the forms to transfer my pension over to the new pension portfolio with income release and also to fill in what sum of money I plan to take out in drawdown ie £20,000 however reading into it a bit more and how it's better protected while still in your pension from IHT (especially if you don't actually need it at the moment)and also the feedback from the knowledgeable posters on here I have kind of stalled on that idea.
Although it's weird to think that you have access to all that tax free money and you aren't planning on using it after us both working from 15 years old till I retired last year at 68.!
Also if it so happens that I don't touch it and we both  live into our  80's the £525,000 could be any figure by then! and our beneficiaries our children  who would be well into there 50's and grandchildren  who will be in there 20's and 30's will be left with it with all the tax implications they will have to sort out but obviously no tax free money out of it for them altho they may not be too concerned about that😊
As has been advised will have to look at passing more over to them all while we are still living, which as I have said previously we have started doing with Lisa's and prob a junior ISA set up for the youngest 6 year old this year.

Bostonerimus1

eric4395 said:

Hal17 said:

Thanks eric4395 for your original post. This was very interesting for me as both your family details and financial position are almost exactly the same as my current situation. 

I have my pension pot in Royal London General Portfolio 5, although I have already taken the 25% tax free sum and given it to my son and daughter and 2 Grandchildren. 

I look forward to reading all the replies.

Yes that's interesting you have already used your tax free sum.
RL have sent me the forms to transfer my pension over to the new pension portfolio with income release and also to fill in what sum of money I plan to take out in drawdown ie £20,000 however reading into it a bit more and how it's better protected while still in your pension from IHT (especially if you don't actually need it at the moment)and also the feedback from the knowledgeable posters on here I have kind of stalled on that idea.
Although it's weird to think that you have access to all that tax free money and you aren't planning on using it after us both working from 15 years old till I retired last year at 68.!
Also if it so happens that I don't touch it and we both  live into our  80's the £525,000 could be any figure by then! and our beneficiaries our children  who would be well into there 50's and grandchildren  who will be in there 20's and 30's will be left with it with all the tax implications they will have to sort out but obviously no tax free money out of it for them altho they may not be too concerned about that😊
As has been advised will have to look at passing more over to them all while we are still living, which as I have said previously we have started doing with Lisa's and prob a junior ISA set up for the youngest 6 year old this year.

I think the most efficient tax scenario is to leave the money in the pensions and die before you are 75. Then your heirs get all the pension money tax free and it won't be included in the estate for IHT purposes. There are obvious drawbacks with that plan for you though.   ;-)

eric4395

Bostonerimus1 said:

eric4395 said:

Hal17 said:

Thanks eric4395 for your original post. This was very interesting for me as both your family details and financial position are almost exactly the same as my current situation. 

I have my pension pot in Royal London General Portfolio 5, although I have already taken the 25% tax free sum and given it to my son and daughter and 2 Grandchildren. 

I look forward to reading all the replies.

Yes that's interesting you have already used your tax free sum.
RL have sent me the forms to transfer my pension over to the new pension portfolio with income release and also to fill in what sum of money I plan to take out in drawdown ie £20,000 however reading into it a bit more and how it's better protected while still in your pension from IHT (especially if you don't actually need it at the moment)and also the feedback from the knowledgeable posters on here I have kind of stalled on that idea.
Although it's weird to think that you have access to all that tax free money and you aren't planning on using it after us both working from 15 years old till I retired last year at 68.!
Also if it so happens that I don't touch it and we both  live into our  80's the £525,000 could be any figure by then! and our beneficiaries our children  who would be well into there 50's and grandchildren  who will be in there 20's and 30's will be left with it with all the tax implications they will have to sort out but obviously no tax free money out of it for them altho they may not be too concerned about that😊
As has been advised will have to look at passing more over to them all while we are still living, which as I have said previously we have started doing with Lisa's and prob a junior ISA set up for the youngest 6 year old this year.

I think the most efficient tax scenario is to leave the money in the pensions and die before you are 75. Then your heirs get all the pension money tax free and it won't be included in the estate for IHT purposes. There are obvious drawbacks with that plan for you though.   ;-)

Yes my children have no idea the amount in my pension and what maybe is coming to them I better not say and mention 75 or they might help me along to depart a bit quicker🤣

Albermarle

Bostonerimus1 said:

Hal17 said:

Thanks eric4395 for your original post. This was very interesting for me as both your family details and financial position are almost exactly the same as my current situation. 

I have my pension pot in Royal London General Portfolio 5, although I have already taken the 25% tax free sum and given it to my son and daughter and 2 Grandchildren. 

I look forward to reading all the replies.

What are the IHT and gift tax implications of that?

There is no gift tax in the UK .