re. initial lump sum treatment for those on DB pensions

Marcon

katejo said:

chubsta said:

I took my lump sum and put it all into a savings account which gives monthly interest (5.03%) which all adds to the money available each month - for various complicated reasons this interest is not taxed either so is a nice little income. I plan to start dipping into it at the rate of about 1/25th of the original total per year in a few years when I hit 60 and when combined with my monthly pension and state pension when I hit 67 (as long as I am not 'means-tested' out of that!) I will be nicely off in my twilight years...

Thanks. This is the sort of thing which I am thinking of doing. I am curious as to why yours isn't taxed (thought you don't need to answer that).

Offshore bond? https://techzone.abrdn.com/public/investment/Practi-g-how-to-offshore-bon

dunstonh

katejo said:

RetiredTaz said:

Somebody said:

You don't have to take the lump sum, which will mean you get a higher annual pension with (some) inflation protection specific to your scheme rules.  You can take between zero and the maximum lump sum.  ask your DB administrator for quotes. 

Unfortunately, some schemes don't have the option to take zero lump sum. I took the minimum I could and put it into ISA's spanning two tax years. 

I already have an ISA with the maximum amount paid in annually so I can't do that. 

There are other wrappers and along with unwrapped.   Generally, you would use a combination based on your current and future tax position.

pterri

I can take my AVCs as a lump sum tax free when I start my DB pension (at 60) or transfer it to a SIPP. I think I’ll take the lump sum and put it in an investment account and slowly feed it into an ISA, I’ll possibly pay some CGT but I think less than the tax on a pension drawdown on a SIPP. I’ve got a few years to think about it. For hassle reasons, having a large ISA that i can dip into as and when I need it with zero complications appeals. 

katejo

pterri said:

I can take my AVCs as a lump sum tax free when I start my DB pension (at 60) or transfer it to a SIPP. I think I’ll take the lump sum and put it in an investment account and slowly feed it into an ISA, I’ll possibly pay some CGT but I think less than the tax on a pension drawdown on a SIPP. I’ve got a few years to think about it. For hassle reasons, having a large ISA that i can dip into as and when I need it with zero complications appeals. 

I have already got a unit trust which is feeding into a stocks and shares ISA. I am not sure whether any increase in value there (before it feeds into the ISA) counts as part of the £1000 interest allowed on savings each tax year. 

anniecave

If a person earns less than £17570 per year of other income then savings income can be tax free for up to £5000 of savings income. So depending on other income it's a better savings allowance than the standard £1000 per year
www.gov.uk/apply-tax-free-interest-on-savings.  That maybe the case in the above.  Maybe. 

katejo

anniecave said:

If a person earns less than £17570 per year of other income then savings income can be tax free for up to £5000 of savings income. So depending on other income it's a better savings allowance than the standard £1000 per year
www.gov.uk/apply-tax-free-interest-on-savings.  That maybe the case in the above.  Maybe. 

But I am earning more than £17570

horsewithnoname

I spent mine on having some improvements done to my home so I can stay here for life and getting it insulated has improved the quality of my home, and looks like it will cut my heating bills for the winter. 

If you are not relying on it for income, spend it on whatever will make you happy. It’s just a tool and has no intrinsic value unless it’s doing something useful. 

leosayer

I'm lucky enough to be entitled to a protected tax free lump sum when I start my DB scheme. In summary, it means I can take the tax free cash from a linked DC scheme without reducing my annual DB pension.

Like others on here I haven't earmarked the funds for anything other than normal retirement spending alongside remaining pensions and existing ISAs. As a result, the tax free cash will remain invested in the same way it is now but getting £200k+ into ISAs require some planning, so I'm using flexible ISAs in the way described in the link below.

https://monevator.com/should-you-borrow-to-fill-your-isa-each-year/

Chances are it may eventually get used for helping my son buy a property.

MallyGirl

without reducing your DB pension?

leosayer

MallyGirl said:

without reducing your DB pension?

Edited, thanks