Living off savings until State Pensions

HopefullyThisWorks

We have just retired, I am 62 and my partner 61, so not receiving State pensions until ‘28/’29.

We have a total of approx £400k which we will have to use as our income until the State Pensions kick in.

What will be the best way to do this?

I was thinking of putting it into Fixed Accounts (so I know what I’m getting each month) and using the interest to contribute towards our cost of living (whether it be monthly or annually)

However I think I will need to top it up, but to do this it will erode the £400k which in turn will generate less interest each year.

I accept that my savings will reduce, I just want to see if there is a way to minimise this.

I don’t want to be an old man with no savings when I need Care etc.

Any ideas are greatly appreciated.

eskbanker

Do you have any other pensions?  If so, then drawing down from them would use your personal allowance, but if not, you could still start one each and receive some tax relief to convert a £2880 net contribution into £3600.

Are you making best use of ISAs or even premium bonds to minimise tax exposure?

Dazed_and_C0nfused

Will there be any tax exposure, in a tax year where no earnings or State Pension come into play?

£400k sounds a lot but is likely to only generate ~£20k in interest between 2 people.

HopefullyThisWorks

eskbanker said:

Do you have any other pensions?  If so, then drawing down from them would use your personal allowance, but if not, you could still start one each and receive some tax relief to convert a £2880 net contribution into £3600.

Are you making best use of ISAs or even premium bonds to minimise tax exposure?

Our Pensions were cashed in, except for £50k which I still have.
I'm considering ISA's but I think there are better Fixed term bank rates and I don't think I would earn enough interest to pay tax. I've not thought of Premium Bonds though, so that's one to consider.

How would this work please?
you could still start one each and receive some tax relief to convert a £2880 net contribution into £3600.

HopefullyThisWorks

Dazed_and_C0nfused said:

Will there be any tax exposure, in a tax year where no earnings or State Pension come into play?

£400k sounds a lot but is likely to only generate ~£20k in interest between 2 people.

No, no tax exposure.
Yes I totally agree, sounds a lot, but......

penners324

You've taken all your money out of those pensions?

Too late now if you but that's awful for tax planning.

HopefullyThisWorks

penners324 said:

You've taken all your money out of those pensions?

Too late now if you but that's awful for tax planning.

I was returning to the UK

eskbanker

HopefullyThisWorks said:

Our Pensions were cashed in, except for £50k which I still have.

As above, if you have £50K in one or more DC pension pots, then drawing this down, while not earning from employment or other pensions, is likely to be tax-advantageous by making use of your otherwise unused personal tax allowance.  However, you'd need to balance this against taxable interest earned on savings to make the best use of allowances and nil-rate bands.

HopefullyThisWorks said:

How would this work please?
you could still start one each and receive some tax relief to convert a £2880 net contribution into £3600.

Anyone can start a pension for themselves, such as a SIPP (self-invested personal pension), and pay into it, with 25% tax relief added to those contributions to gross them up - the level of contribution is generally capped at annual earnings (from employment) but even those without earnings can still pay in up to £2,880 net:

https://www.litrg.org.uk/pensions/paying-pensions/tax-relief-pension-contributions#5

HopefullyThisWorks

eskbanker said:

HopefullyThisWorks said:

Our Pensions were cashed in, except for £50k which I still have.

As above, if you have £50K in one or more DC pension pots, then drawing this down, while not earning from employment or other pensions, is likely to be tax-advantageous by making use of your otherwise unused personal tax allowance.  However, you'd need to balance this against taxable interest earned on savings to make the best use of allowances and nil-rate bands.

HopefullyThisWorks said:

How would this work please?
you could still start one each and receive some tax relief to convert a £2880 net contribution into £3600.

Anyone can start a pension for themselves, such as a SIPP (self-invested personal pension), and pay into it, with 25% tax relief added to those contributions to gross them up - the level of contribution is generally capped at annual earnings (from employment) but even those without earnings can still pay in up to £2,880 net:

https://www.litrg.org.uk/pensions/paying-pensions/tax-relief-pension-contributions#5

Many Thanks

Albermarle

I accept that my savings will reduce, I just want to see if there is a way to minimise this.

I don’t want to be an old man with no savings when I need Care etc.

The usual advice would be not hold all your money in savings accounts, but invest the majority of it. Over the long term this should make your money last longer. Of course this assumes the investments would be regular mainstream investments of stocks and shares and not anything exotic and/or dodgy.

With £400K you might be better seeing a financial advisor, rather than just asking random strangers on the internet.

HopefullyThisWorks

Albermarle said:

I accept that my savings will reduce, I just want to see if there is a way to minimise this.

I don’t want to be an old man with no savings when I need Care etc.

The usual advice would be not hold all your money in savings accounts, but invest the majority of it. Over the long term this should make your money last longer. Of course this assumes the investments would be regular mainstream investments of stocks and shares and not anything exotic and/or dodgy.

With £400K you might be better seeing a financial advisor, rather than just asking random strangers on the internet.

Thanks for the advice   To be honest I always intended to, I just wanted to see if I was thinking along the right lines