I did it… I’m retiring… no more dithering

Pat38493

bluenose1 said:

@katejo and @moonwolf. In the tax year you retire I would consider putting all your taxable earnings into a SIPP for the 6.25% return after tax. I put mine in a cash HL SIPP and withdrew it about 9 weeks later when it had been topped up. Depending on whether you leave before or end of next tax year Moonwolf you may also want to consider it for this tax year if you have savings you can use, doesn’t need to be paid in until just before end of 24/25 tax year. Just need to make sure withdrawing it wouldn’t make you a higher rate tax payer in that year.
I also used the “small pots” rule in the run up to retirement to get 3 x £10,000 withdrawal. Worth checking on here if you don’t know about it. Basically I put £8,000 into a HL SIPP and it is  topped up to £10,000 after about 9 weeks. After tax you get £8,500 back, do it again twice more with the same £8k if required,  again be careful doesn’t put you in higher rate tax bracket. Great to make £500 for an hour or so work. 

Katejo - I think it’s known that people can  find it difficult to spend in retirement after so many years of accumulation. I have worked my income and savings out until age 67 when SP starts, keeping back a set amount of savings for emergencies, and have given myself a monthly allowance to cover all essential spending and a “fun” fund. Feel like a monthly salary.

Does the 6.25% benefit still exist even if it's the part of your salary that would have been in the personal allowance?

michaels

Pat38493 said:

bluenose1 said:

@katejo and @moonwolf. In the tax year you retire I would consider putting all your taxable earnings into a SIPP for the 6.25% return after tax. I put mine in a cash HL SIPP and withdrew it about 9 weeks later when it had been topped up. Depending on whether you leave before or end of next tax year Moonwolf you may also want to consider it for this tax year if you have savings you can use, doesn’t need to be paid in until just before end of 24/25 tax year. Just need to make sure withdrawing it wouldn’t make you a higher rate tax payer in that year.
I also used the “small pots” rule in the run up to retirement to get 3 x £10,000 withdrawal. Worth checking on here if you don’t know about it. Basically I put £8,000 into a HL SIPP and it is  topped up to £10,000 after about 9 weeks. After tax you get £8,500 back, do it again twice more with the same £8k if required,  again be careful doesn’t put you in higher rate tax bracket. Great to make £500 for an hour or so work. 

Katejo - I think it’s known that people can  find it difficult to spend in retirement after so many years of accumulation. I have worked my income and savings out until age 67 when SP starts, keeping back a set amount of savings for emergencies, and have given myself a monthly allowance to cover all essential spending and a “fun” fund. Feel like a monthly salary.

Does the 6.25% benefit still exist even if it's the part of your salary that would have been in the personal allowance?

Yes - you get the 25% uplift on contributions even if they were from salary that was not actually taxed because it was within the personal allowance

LHW99

katejo said:

bluenose1 said:

katejo said:

bluenose1 said:

@katejo and @moonwolf. In the tax year you retire I would consider putting all your taxable earnings into a SIPP for the 6.25% return after tax. I put mine in a cash HL SIPP and withdrew it about 9 weeks later when it had been topped up. Depending on whether you leave before or end of next tax year Moonwolf you may also want to consider it for this tax year if you have savings you can use, doesn’t need to be paid in until just before end of 24/25 tax year. Just need to make sure withdrawing it wouldn’t make you a higher rate tax payer in that year.
I also used the “small pots” rule in the run up to retirement to get 3 x £10,000 withdrawal. Worth checking on here if you don’t know about it. Basically I put £8,000 into a HL SIPP and it is  topped up to £10,000 after about 9 weeks. After tax you get £8,500 back, do it again twice more with the same £8k if required,  again be careful doesn’t put you in higher rate tax bracket. Great to make £500 for an hour or so work. 

Katejo - I think it’s known that people can  find it difficult to spend in retirement after so many years of accumulation. I have worked my income and savings out until age 67 when SP starts, keeping back a set amount of savings for emergencies, and have given myself a monthly allowance to cover all essential spending and a “fun” fund. Feel like a monthly salary.

I already use a budgeting software which I started 10 years ago so I have clear categories for everything including emergency funds and everything else. Aren't there limits on a SIPP? i already have the max amount in an ISA for this tax  year.

You  can put 100% of your earnings into a SIPP, the maximum allowed is £60k per year. SIPPs are not  linked to ISAs. 

I always get mixed up with the terminology but think you actually pay in 80% of your taxable pay and HMRC top up your SIPP by 25%.
I will be putting in £2,880 per year from this year for the 6.25% uplift, this is the max allowed when no earned income.

Even if I am paying into a DB pension? I am a standard rate tax payer. 

If you have another scheme that you are also paying in to, then you need to subtract that from the £60k annual allowance. If you have enough earnings in this tax year to have used up all the £60k allowance between all the pensions you contribute to, then you can use some of the previous year's unused annual allowance if you have any.

bluenose1

katejo said:

I already use a budgeting software which I started 10 years ago so I have clear categories for everything including emergency funds and everything else. Aren't there limits on a SIPP? i already have the max amount in an ISA for this tax  year.

SIPPs are unrelated to ISAs so you are fine to have both with their separate limits.
 You can also put into your works pension scheme as well as a SIPP.

As an  broad example say your salary is £30k per annum and you pay £10k of that into your pension, your taxable income would be £20k. 

You could pay £16k (which is £20k x 80%) of that into a SIPP and HMRC would top up to £20k.

When withdrawing if you stay a basic rate taxpayer then you would receive £17k after about 9 weeks of your original £16k deposit.
Even better for those living off savings with no other income  you could potentially withdraw over £16k in each tax year without paying any tax as first 25% of withdrawal is tax free.

I worked out my taxable income for the tax year by looking at my last payslip from when I finished work, if still working you could calculate yourself or it would be based on your March 25 payslip.

Sunsh1ne54

Well, glad to have helped 😂🤣

FIREmenow

@Sunsh1ne54 Your thread got derailed a bit but congrats on pulling the trigger! Hope you enjoy not being at work, whatever you do instead

cloud_dog

katejo said:

bluenose1 said:

katejo said:

bluenose1 said:

@katejo and @moonwolf. In the tax year you retire I would consider putting all your taxable earnings into a SIPP for the 6.25% return after tax. I put mine in a cash HL SIPP and withdrew it about 9 weeks later when it had been topped up. Depending on whether you leave before or end of next tax year Moonwolf you may also want to consider it for this tax year if you have savings you can use, doesn’t need to be paid in until just before end of 24/25 tax year. Just need to make sure withdrawing it wouldn’t make you a higher rate tax payer in that year.
I also used the “small pots” rule in the run up to retirement to get 3 x £10,000 withdrawal. Worth checking on here if you don’t know about it. Basically I put £8,000 into a HL SIPP and it is  topped up to £10,000 after about 9 weeks. After tax you get £8,500 back, do it again twice more with the same £8k if required,  again be careful doesn’t put you in higher rate tax bracket. Great to make £500 for an hour or so work. 

Katejo - I think it’s known that people can  find it difficult to spend in retirement after so many years of accumulation. I have worked my income and savings out until age 67 when SP starts, keeping back a set amount of savings for emergencies, and have given myself a monthly allowance to cover all essential spending and a “fun” fund. Feel like a monthly salary.

I already use a budgeting software which I started 10 years ago so I have clear categories for everything including emergency funds and everything else. Aren't there limits on a SIPP? i already have the max amount in an ISA for this tax  year.

You  can put 100% of your earnings into a SIPP, the maximum allowed is £60k per year. SIPPs are not  linked to ISAs. 

I always get mixed up with the terminology but think you actually pay in 80% of your taxable pay and HMRC top up your SIPP by 25%.
I will be putting in £2,880 per year from this year for the 6.25% uplift, this is the max allowed when no earned income.

Even if I am paying into a DB pension? I am a standard rate tax payer. 

@katejo if you re paying into a DB scheme you would need to work out your Pension Input Amount in order to ascertain any remaining AA availability.  You don't uae the contribution amounts with DB schemes calculate any AA surplus.  

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm053301

https://www.mandg.com/pru/tools-calculators/defined-benefit-pension-input-tool/index.html

If we are talking relatively small amounts then there is unlikely to be an issue.

Sunsh1ne54

FIREmenow said:

@Sunsh1ne54 Your thread got derailed a bit but congrats on pulling the trigger! Hope you enjoy not being at work, whatever you do instead

Many thanks @FIREmenow 😁 Always good to start a good discussion especially if it helps others in the same boat… as for me, I’m starting to feel able to plan my retirement now but still a fair bit at work to organise before I leave.