Pension Planning for having too much pension.

solidpro

Before everyone loses their marbles and shoots me down about having 'too much pension', here's the thing.

I've used company pension payments over the course of 10-15 years to reduce corporation tax - using the maximum each year on two people to increase our private pensions and reduce our corporation tax. We have been thrifty in ploughing a lot in this way so that we're 'in the game' for 25-35 years to benefit from the magic of compound interest and we have taken a 'salary' for the minimum we need now - essentially our monthly living costs + holiday and using capital inside corporations to buy rental properties outright (although we're finished doing that).

Not that I have to justify it but we still pay more in CT and Dividend Tax than the average couple would through income tax and NI.

I am only 45 and we live  (and outright own) a very modest house in an area my children go to school. We're staying here in this house until they're done, which is another 5-ish years.

I feel that by the age of 50, I may be in a position to stop our main roles and take on smaller local jobs for an easier life but lower income and will want to buy a much nicer house with a big garden, but most of our capital will be holed up in private pensions.

As stated, we also have other investments which will fund our retirement, such as real estate rentals. We also will both have the full quota of NI for state pension, (if it still exists in 25-30 years now that we have 'taken back control'). We have done the calculations and essentially we want to live in a nicer house and have a smaller private pension pot in our 50s.

What might we do to get some of that PP money back out 'early' with the least pain and what age would I be able to do that? My wife is a little older at 49 and half of the pensions are in her name.

Or, do I have to spend the next 5 years paying more CT and less/nothing into pensions?

Or do we sell rental, forfeit the 'pension age' income but use the capital it will bring us to buy our next house. We don't want to do that because that's essentially what will fund my semi-retirement at 50.

I don't want to leave my kids anything except the house we live in.

wjr4

You have to wait until the minimum pension age to access them. Pensions are usually outside of your estate for inheritance tax purposes, and part of your overall financial plan. Do you have an IFA who helps you with your financial plan?

dunstonh

What might we do to get some of that PP money back out 'early' with the least pain and what age would I be able to do that? My wife is a little older at 49 and half of the pensions are in her name.

Nothing.  age 57 (possibly 58) will be the earliest point.   

Or, do I have to spend the next 5 years paying more CT and less/nothing into pensions?

If you have nothing else to fund the gap until age 57 (58) then yes.

solidpro

Don't have an IFA. Looked into it last year and after 2 hours of researching local human beings through recommendations, I was convinced it would be very expensive for them to tell me what I already know. I have annual meetings with at least 2 different accountants, where personal finance comes up frequently and that's the message I get.

I understand death planning will be another matter altogether.

As I said, part time work and rental income will find the gap until 57/58. We have very low outgoings due to having a decent electric car, investments in ripple which subsidises our energy bill, no mortgage, etc. The only thing that would change would be re-investing in a larger house with all that carried over, plus more renewable energy generation to power it.

So what do people do at 57/58 to get access to their PP as a bulk payment?

dunstonh

So what do people do at 57/58 to get access to their PP as a bulk payment?

You could ask your accountant

There are multiple methods available to suit your needs.   So, people will generally do what is best for them.

solidpro

dunstonh said:

You could ask your accountant

If we all did that, there would be no posts here.  The more informed I have when I have those conversations, the better the outcome of our choices.

Examples of 'multiple methods'? Come on, don't be shy....

Qyburn

solidpro said:

So what do people do at 57/58 to get access to their PP as a bulk payment?

"Bulk payment" including the taxable element is probably a bad idea as it will be taxed as that year's income. But you could take just the tax free element, normally 25% of the total.

wjr4

Your accountant isn’t a financial planner and it’s surprising how many accountants have no idea about pensions and investments…. As it isn’t their job to know. 

solidpro

I realise that, but when different people 'in finance' of some sort or another all gently nod and say something to the tune of 'good plan' then I don't feel like paying someone else £5000 to tell me if I'm right. At least until I enter into a really specific scenario with really defiitive requirements - like buying property abroad etc...

My situation isn't rocket science, but when I need some rocket science solutions, I will seek advice.

solidpro

Qyburn said:

"Bulk payment" including the taxable element is probably a bad idea as it will be taxed as that year's income. But you could take just the tax free element, normally 25% of the total.

If that answer is at about 58 at the earliest we could take 25% out, then that's the answer I'm looking for. What's that process referred to in the industry?

LHW99

solidpro said:

Qyburn said:

"Bulk payment" including the taxable element is probably a bad idea as it will be taxed as that year's income. But you could take just the tax free element, normally 25% of the total.

If that answer is at about 58 at the earliest we could take 25% out, then that's the answer I'm looking for. What's that process referred to in the industry?

"Crystallisation"

Everything else will be taxable, so no tax due if within you pesonal allowances. But if you take any taxable then you are subject to the MPAA going forward