Retirement calculations

flopsy1973

Ciprico said:

Are you still contributing to the pension... Probably not much point if you are, as you may struggle to get it out without hitting 40% tax rate....

Hi 
Can someone explain why I would be hitting the 40% tax rate as I am considering adding a lump sum to this pension ?

Dazed_and_C0nfused

flopsy1973 said:

Ciprico said:

Are you still contributing to the pension... Probably not much point if you are, as you may struggle to get it out without hitting 40% tax rate....

Hi 
Can someone explain why I would be hitting the 40% tax rate as I am considering adding a lump sum to this pension ?

No one knows if you would.  But if you already have £1.2 million in the pension then you could easily be taking enough money out to get to the higher rate threshold.

Especially in years where you could be receiving £11.5k in State Pension.

The higher rate threshold is only £43,662 in Scotland, £50,270 elsewhere, but that is likely to be the same for a few years to come so more people could easily become higher rate payers.

Sarahspangles

Based on what you said previously, you would already have £42k a year income from your pot if you withdrew at the safe withdrawal rate. Add on a full state pension and you would be a higher rate taxpayer.

Cobbler_tone

flopsy1973 said:

Hi I have my company pension on the aegon platform and I used their calculator to work out if we could retire early. I have 1.2 million in assets and we want to retire at 60 with a income of 30k. We will both get full state pensions. According to the aegon calculator we are short but that sounds wrong and no explanation?

You clearly wouldn’t but if you have £1.2m in a pension (even forgetting the tax free amount), you could draw down 40k a year and stick it in a zero interest current account and live comfortably.
As it is your annuity would be decent (even at 55) and your biggest challenge is going to be dodging the tax bills. 

There’ll be no ‘right’ option but it sounds like you have plenty of them.
I certainly wouldn’t be using the Aegon calculator if it’s saying you are short!

flopsy1973

Sorry all that  money is not in the pension that is total figure of my assets. There is about 200k in pension. So what do I need to be thinking about now to avoid tax bills in the future ?

MallyGirl

you haven't been very clear in your posts which has given people the impression that you have £1.2m in pensions - hence the comments about the risk of paying high rate tax when you draw it out.
If most of your assets are outside of a pension then income tax might not be an issue. If in cash then you will pay tax on the interest, if in GIA then maybe there are capital gains issues instead.

Dazed_and_C0nfused

flopsy1973 said:

Sorry all that  money is not in the pension that is total figure of my assets. There is about 200k in pension. So what do I need to be thinking about now to avoid tax bills in the future ?

Your comments like the one below are why people thought you had £1.2million in a pension.

Not thought about that I was hoping there would be enough in the pot for the remaining one. It's 1.2 now so hopefully more in 10 yes. 

flopsy1973

Sorry for not explaining enough. So I can add to my pension what do I need to be thinking about going forward to plan early retirement