Accessing pension pots and savings in retirement

aphty

I am just about to explore my best pension / retirement options, including a plan to quickly seek financial advice, based on the following model; 

At the end of 2023, aged 61, I accepted a voluntary redundancy package which brought the total savings figure for both myself and my wife (mix of ISAs and non ISA accounts) to 200k.

Wife (aged 58) will continue working (net income 30k pa) 9 more years until aged 67 she will receive approx. 10k pa state pension and 10k pa defined benefits pension

I will receive approx. 10k pa state pension in 6 years time. My approx current personal pension pot value (3 separate pots), not yet accessed, is 650k

My ideal objective is to do no more paid work and my aim for the next 6 years is to personally contribute net 36k pa to the household in the most tax efficient way possible. I would also want to factor in maximising a legacy within the plan if possible. 

I would really appreciate any thoughts at all on what I should be considering. My own first thoughts to achieve the 36k figure have been;

• Possibly a combination of spending the savings / managing savings to ensure interest received is not taxed / plus taking lump sum UFPLS payments 16760 from the pension to use the personal allowance?
• Should I transfer some of the savings into the pension before April to the maximum annual allowance limit if I can get higher rate tax relief having been employed this tax year? Next tax year onwards as a non earner should I pay 2880 from savings into the pension as 20% tax relief is better than savings interest?
• How should I go about seeking financial advice (possibly combining pots and certainly ensuring risk profile is consistent across them)? Will the fee be based on a percentage of the value of the pension pot alone - as it is the biggest asset this seem like it might be quite high - is it possible to search for Advisors who offer a capped one off fee arrangement?

Any advice gratefully received!

af1963

Paying in to the pension this year would increase your pension fund by whatever you pay in plus 25%  ( the 20% tax relief added to the 80% that you actually pay in)   You'd pay tax on this when withdrawing, apart from the 25% tax free portion. But still worthwhile.

You need to also take account of payments you've already made.  Your own *total* contributions can go up to your  full relevant earnings (salary + work benefits); the total from you and your employer can go up to the annual allowance limit.

Same idea next year onwards, but limited to £3600 gross - and it's not "instead of" savings interest - once it's in the SIPP it can be invested.

Qyburn

aphty said:

• Should I transfer some of the savings into the pension before April to the maximum annual allowance limit if I can get higher rate tax relief having been employed this tax year? 

I did exactly that last year. Once i knew my total pay up to the point I stopped working,  i made a lump sum payment into my pension to fully use the allowance. Tax return then done lat April and tax refund received early May.

Dazed_and_C0nfused

aphty said:

I am just about to explore my best pension / retirement options, including a plan to quickly seek financial advice, based on the following model; 

At the end of 2023, aged 61, I accepted a voluntary redundancy package which brought the total savings figure for both myself and my wife (mix of ISAs and non ISA accounts) to 200k.

Wife (aged 58) will continue working (net income 30k pa) 9 more years until aged 67 she will receive approx. 10k pa state pension and 10k pa defined benefits pension

I will receive approx. 10k pa state pension in 6 years time. My approx current personal pension pot value (3 separate pots), not yet accessed, is 650k

My ideal objective is to do no more paid work and my aim for the next 6 years is to personally contribute net 36k pa to the household in the most tax efficient way possible. I would also want to factor in maximising a legacy within the plan if possible. 

I would really appreciate any thoughts at all on what I should be considering. My own first thoughts to achieve the 36k figure have been;

• Possibly a combination of spending the savings / managing savings to ensure interest received is not taxed / plus taking lump sum UFPLS payments 16760 from the pension to use the personal allowance?
• Should I transfer some of the savings into the pension before April to the maximum annual allowance limit if I can get higher rate tax relief having been employed this tax year? Next tax year onwards as a non earner should I pay 2880 from savings into the pension as 20% tax relief is better than savings interest?
• How should I go about seeking financial advice (possibly combining pots and certainly ensuring risk profile is consistent across them)? Will the fee be based on a percentage of the value of the pension pot alone - as it is the biggest asset this seem like it might be quite high - is it possible to search for Advisors who offer a capped one off fee arrangement?

Any advice gratefully received!

Depending on how you decide to approach this one tweak you could make is to apply for Marriage Allowance from 2024-25 onwards and take slightly less under UFPLS whilst still ensuring no tax is payable and your wife will get £252 knocked off her tax liability each year.

Obviously this isn't going to be of any benefit if you decide that you need to take £16,760 (UFPLS) or your wife is a higher rate taxpayer (which doesn't seem to be the case)?

aphty

Thanks so much for all the comments so far - really helpful. I dithered before deciding to post this question - which is if anyone can give me any feedback along the lines of whether my circumstances and plan mentioned above meets the common sense test? Has anyone been in a similar ish position or somehow has a feel for whether the numbers roughly would appear to work? Appreciate there are a huge number of variables and everyone has experience of different circumstances - just genuinely trying to get a feel for whether responses are likely to be 'you'll struggle to make that work' / 'yes but only with careful planning to deal with issues x.y.x etc' / 'yes that seems realistic and doable' etc. Cheers

QrizB

A couple of thoughts:

You haven't said what "your number" - your target household income in retirement - is. We've had people with numbers that range from £15k to £50k. What's yours?

Are you sure that your wife is happy to continue to work until 67, with you having retired at 61? Does she love her job that much?

NoMore

QrizB said:

A couple of thoughts:

You haven't said what "your number" - your target household income in retirement - is. We've had people with numbers that range from £15k to £50k. What's yours?

Are you sure that your wife is happy to continue to work until 67, with you having retired at 61? Does she love her job that much?

He says he wants net 36k p.a.

QrizB

NoMore said:

QrizB said:

A couple of thoughts:

You haven't said what "your number" - your target household income in retirement - is. We've had people with numbers that range from £15k to £50k. What's yours?

Are you sure that your wife is happy to continue to work until 67, with you having retired at 61? Does she love her job that much?

He says he wants net 36k p.a.

No, he's said he want to contribute £36k pa to the household expenditure for the next six years.

That's not the same thing.

During those six years, the household also has £30k pa from his wife's earnings. Does this mean his number is £66k?

Or is his wife planning to feed all of that into her pension? Or spend it on strippers and coke?

Then, what's his plans after six years?

And in nine years, when his wife's income drops from £30k to £20k, what then?

aphty

Thanks  - second question is easy - Yes, she will definitely want to work until 67. 
As far as the 'number' goes - our position last year very roughly was; net salary self 48 and wife 30, which was balanced by 60k covering all outgoing payments and 18 to savings.
I am roughly calculating for the next 6 year for household income to be net 66 (36 self / 30 wife) taking me to 67 when state pension 10k is added and by then my pension pot could have reduced from current 650 to 550 and savings from 200 to 120.
We would then have 3 more years until my wife reaches 67, with my own contribution being 26 from pension  / savings pot plus 10k state pension.
After that point I guess the household income position when we are aged 67 and 70 would be 56 (36 self / 20 wife from 10k state and 10k her DB pension). Appreciate all these are 'today's' figures only.

QrizB

Ok, so (ignoring your wife for now) you're looking for your combined savings-and-SIPP of £850k to provide:

• 36k pa for 6 years; then
  
• 26k pa for the rest of your lifetimes.

If we imagine you putting aside £60k in something low-risk to substitute for your state pension for the forst six years, that means you're taking £26k from £790k. That's an initial withdrawal rate of 3.3%, which is the sort of figure that's likely to work out OK for a UK 61-year-old.

Regarding your original questions, I think that making use of your final year's salary to pay as much as possible into your SIPP from your savings makes sense, as does continuing to move £2880/£3600 into your SIPP for the foreseeable future. Your wife could do the same (noting that you haven't mentioned her having a SIPP) with the goal of getting the majority of your savings inside pensions, for the 6.25% benefit and potential IHT mitigation.

Takung annual UFPLS to make best use of your personal allowance also seems prudent.

I can't help you on the "advice" question; so far I've DIY'd. Only hindsight will tell whether this was a good idea!