Should we contribute to a personal pension after retirement.

swanny65

I have been an occasional poster on here as I neared my retirement. I am fortunate to be about to take early retirement from Civil Service aged 59.
I have been sent the figures by CSP. I intend to take my Classic pension, with the Mccloud option, plus a small Alpha pension from 4/22, immediately both reduced for early retirement. 
I intend to take the max classic lump sum of £155K with a reduced Classic & full Alpha combined pension of £24K pa. 
My wife will also retire early in 2025 at age 57 and her current projected pension is £14K pa with a £65K lump sum. 
After paying off our mortgage, replacing our kitchen, paying the kids final year's uni rent, and changing the car we will have about £100K in the bank and can live on this and a £36K combined pension for 8 - 10 years until our state pensions are paid.
I also have a CSAVC pot with L&G currently worth £82K which was going to be drawdown on and used to support us until we got our state pensions. However, I now don't think we will need to drawdown this pension as we will have enough income, and I intend to leave it to fund my wife's retirement were I to die - I believe she will be paid the final value as a lump sum.
I had been told that we could both contribute £2880 into a personal pension after we have retired, this seemed sensible as I would get tax relief topping up the contributions made. However, L&G told me once I leave the Civil Service I can not contribute to my CSAVC - this would have been my preferred choice.
Is it worthwhile starting two personal pensions for this purpose or should I stick with topping up a small stocks and shares ISA worth about £10K I have with Best Invest and start a similar ISA for my wife. I am thinking while we get tax relief on what we put into the personal pensions we would pay income tax on any income taken when we draw on the pension and maybe going with the stocks and shares ISA has a similar return?
My sense is I should not move the CSAVC pension as it is performing well (I can selected the funds), it has low charges, and it might cost a fee to move. Would this be correct?
Thanks very much       

Marcon

swanny65 said:

I have been an occasional poster on here as I neared my retirement. I am fortunate to be about to take early retirement from Civil Service aged 59.
I have been sent the figures by CSP. I intend to take my Classic pension, with the Mccloud option, plus a small Alpha pension from 4/22, immediately both reduced for early retirement. 
I intend to take the max classic lump sum of £155K with a reduced Classic & full Alpha combined pension of £24K pa. 
My wife will also retire early in 2025 at age 57 and her current projected pension is £14K pa with a £65K lump sum. 
After paying off our mortgage, replacing our kitchen, paying the kids final year's uni rent, and changing the car we will have about £100K in the bank and can live on this and a £36K combined pension for 8 - 10 years until our state pensions are paid.
I also have a CSAVC pot with L&G currently worth £82K which was going to be drawdown on and used to support us until we got our state pensions. However, I now don't think we will need to drawdown this pension as we will have enough income, and I intend to leave it to fund my wife's retirement were I to die - I believe she will be paid the final value as a lump sum.
I had been told that we could both contribute £2880 into a personal pension after we have retired, this seemed sensible as I would get tax relief topping up the contributions made. However, L&G told me once I leave the Civil Service I can not contribute to my CSAVC - this would have been my preferred choice.
Is it worthwhile starting two personal pensions for this purpose or should I stick with topping up a small stocks and shares ISA worth about £10K I have with Best Invest and start a similar ISA for my wife. I am thinking while we get tax relief on what we put into the personal pensions we would pay income tax on any income taken when we draw on the pension and maybe going with the stocks and shares ISA has a similar return?
My sense is I should not move the CSAVC pension as it is performing well (I can selected the funds), it has low charges, and it might cost a fee to move. Would this be correct?
Thanks very much       

You'd both get basic rate tax relief added to a personal pension pot, meaning £2,880 becomes £3,600 pretty much overnight - quite a difficult return to beat!

You could withdraw 25% of each pot tax free, with the remaining 75% taxed at your marginal rate. Or you could leave the money there and (under current legislation, which could change) leave it for your children to inherit, tax free if you are under 75 when you die.

swanny65 said:

My sense is I should not move the CSAVC pension as it is performing well (I can selected the funds), it has low charges, and it might cost a fee to move. Would this be correct?
 

Unless you can get similar funds at lower charges elsewhere, then it's hard to see why you'd want to move it. One thing though - assumptions are dangerous things. Facts and certainty will serve you better, so  

'I intend to leave it to fund my wife's retirement were I to die - I believe she will be paid the final value as a lump sum'

maybe check 'believe' so that it becomes 'I know...'?

GunJack

Bear in mind you're both going to be basic rate taxpayers when in receipt of your pensions, so the faff of getting the tax relief only works out to about 6.25%....might get similar return with less faff by just topping up your ISAs...

Marcon

GunJack said:

Bear in mind you're both going to be basic rate taxpayers when in receipt of your pensions, so the faff of getting the tax relief only works out to about 6.25%....might get similar return with less faff by just topping up your ISAs...

...but an ISA isn't inheritable in the same way as a personal pension, assuming legislation doesn't change, which is far from certain....

bluenose1

GunJack said:

Bear in mind you're both going to be basic rate taxpayers when in receipt of your pensions, so the faff of getting the tax relief only works out to about 6.25%....might get similar return with less faff by just topping up your ISAs...

You get the 6.25% after approx 9 weeks of investing rather than waiting the whole year, so for me I think it is worth it. I always withdraw immediately to then put in a high interest account.

AlanP_2

GunJack said:

Bear in mind you're both going to be basic rate taxpayers when in receipt of your pensions, so the faff of getting the tax relief only works out to about 6.25%....might get similar return with less faff by just topping up your ISAs...

What faff?

Pay in to a pension and choose investments, HMRC add 25%. Pay 15% income tax when withdrawn (if ever).

Pay into an ISA, same investment choices hence same investment returns.

Neither option takes any longer than the other and pension gains 6.25% at point f withdrawal compared to ISA.

Much less faff to my mind than chasing fractions of a percentage on savings accounts.

swanny65

Been away for the weekend and catching up. Thanks very much. Pension it is.It a bit of a faff L&G wont let me carry on contributing

And @Macron sorry that should say i know.....

swanny65

One final thought based on what I am sure I have read here but can't find it.....

As mentioned my wife retires Jan 25 she has a Civil Service pension. If she starts a personal pension this 24/25 tax year can we throw in a larger amount? I am sure I read it can be more as she has earnings. Then get the 25% relief and withdraw a couple of months later.

Appreciate there may be a risk to the capital in the couple of months the money is invested.

Thanks very much

swanny65

AlanP_2 said:

GunJack said:

Bear in mind you're both going to be basic rate taxpayers when in receipt of your pensions, so the faff of getting the tax relief only works out to about 6.25%....might get similar return with less faff by just topping up your ISAs...

What faff?

Pay in to a pension and choose investments, HMRC add 25%. Pay 15% income tax when withdrawn (if ever).

Pay into an ISA, same investment choices hence same investment returns.

Neither option takes any longer than the other and pension gains 6.25% at point f withdrawal compared to ISA.

Much less faff to my mind than chasing fractions of a percentage on savings accounts.

Is 15% correct - I thought pensions were taxed as income and the basic rate income tax is 20% ?

NoMore

swanny65 said:

AlanP_2 said:

GunJack said:

Bear in mind you're both going to be basic rate taxpayers when in receipt of your pensions, so the faff of getting the tax relief only works out to about 6.25%....might get similar return with less faff by just topping up your ISAs...

What faff?

Pay in to a pension and choose investments, HMRC add 25%. Pay 15% income tax when withdrawn (if ever).

Pay into an ISA, same investment choices hence same investment returns.

Neither option takes any longer than the other and pension gains 6.25% at point f withdrawal compared to ISA.

Much less faff to my mind than chasing fractions of a percentage on savings accounts.

Is 15% correct - I thought pensions were taxed as income and the basic rate income tax is 20% ?

20% is the actual income tax you will pay, but 25% of it is tax free so that works out as a marginal rate of 15%.

LHW99

swanny65 said:

One final thought based on what I am sure I have read here but can't find it.....

As mentioned my wife retires Jan 25 she has a Civil Service pension. If she starts a personal pension this 24/25 tax year can we throw in a larger amount? I am sure I read it can be more as she has earnings. Then get the 25% relief and withdraw a couple of months later.

Appreciate there may be a risk to the capital in the couple of months the money is invested.

Thanks very much

She can add up to her (net) earnings, but that must include any CS pension, for which I believe she probably needs to know the Pension Input amount, rather than what she actually contributes.