should i take an old DB pension now or leave it?

sadexpunk

thanks

might not be thinking this through properly, but my first thought was.....

"Another is where you take the full TFLS upfront and then the remaining crystallized pot (including any investment growth) is taxable when taken out of the pension.  For example say you have £200k in the SIPP and take the full 25% TFLS upfront, leaving £150k crystallized in the pension for a few years.  That £150k grows back to say £185k.  When any of that £185k is taken out of the pension it's all taxable income as you took the full 25% TFLS upfront."

this is 'drawdown' yes?  so take 25%, everything else is taxed.....

now my sneaky mind is thinking......

"One very common one is UFPLS, where (subject to the cap) 25% of each withdrawal is a TFLS and 75% is taxable income.    Like your example."

so take 24% out TF so it doesnt class as drawdown, and then all subsequent withdrawals also have a 25% TF element?

i know im missing something, must be     

FIREDreamer

sadexpunk said:

thanks

might not be thinking this through properly, but my first thought was.....

"Another is where you take the full TFLS upfront and then the remaining crystallized pot (including any investment growth) is taxable when taken out of the pension.  For example say you have £200k in the SIPP and take the full 25% TFLS upfront, leaving £150k crystallized in the pension for a few years.  That £150k grows back to say £185k.  When any of that £185k is taken out of the pension it's all taxable income as you took the full 25% TFLS upfront."

this is 'drawdown' yes?  so take 25%, everything else is taxed.....

now my sneaky mind is thinking......

"One very common one is UFPLS, where (subject to the cap) 25% of each withdrawal is a TFLS and 75% is taxable income.    Like your example."

so take 24% out TF so it doesnt class as drawdown, and then all subsequent withdrawals also have a 25% TF element?

i know im missing something, must be     

24% tax free, remaining 72% (3x the tax free bit) is moved to a taxable pot with the final 4% that is not crystallised and from which 25% of that 4% ie 1% of the total is tax free. So tax free cash amount isn’t improved, maybe minusculely if that 4% grows

sadexpunk

"24% tax free, remaining 72% (3x the tax free bit) is moved to a taxable pot with the final 4% that is not crystallised and from which 25% of that 4% ie 1% of the total is tax free. So tax free cash amount isn’t improved, maybe minusculely if that 4% grows"

wow thats complicated!   

af1963

sadexpunk said:

...

wow thats complicated!   

Not as complex as it sounds.  For every £1 you take out tax free, you're entitled to another £3 taxable.  If you take the whole £4 at the same time, the tax free and taxable parts are paid together and there's nothing left over.  But if you just take out £1 tax free, the pension provider needs to "remember" that you still have the associated £3 but you have already had your tax free payment on it. So it treats the leftover £3 as a separate pot.

The leftover £3 might later double to £6.  But  because it's in the "already had your tax free cash" pot, you can't get any more tax free.

Or it could shrink  - even to zero with some bad or unlucky investments - but you'd still get to keep your initial £1 of tax free cash.

sadexpunk

wow again!  i think im getting there :-) 
i read that and was about to post "not as complex as it sounds???  you want to try having my financially naive brain!!"

then i read it again properly and took it in, and it makes perfect sense.  and i actually understand it, thats a very good explanation of the process.

thank you very much, appreciated.

sadexpunk

just been googling as i wasnt sure, and still not 100% certain, am i right in thinking that the age for state pension for both men and women will be 67 in a couple of years time?  im 60 now, my wife 50.  if im doing my calculations for the future, is this correct to assume?

thanks

NoMore

sadexpunk said:

just been googling as i wasnt sure, and still not 100% certain, am i right in thinking that the age for state pension for both men and women will be 67 in a couple of years time?  im 60 now, my wife 50.  if im doing my calculations for the future, is this correct to assume?

thanks

The best way would be for you and your wife  to use Check your State Pension forecast - GOV.UK (www.gov.uk) and check what your entitlement will be and when you can receive it. 

Sarahspangles

You can check here https://www.gov.uk/state-pension-age but also read the link on that page about an imminent review. Probably more likely to affect your better half.

sadexpunk

thanks, ill check that when im at home and have my details to hand.

also to aid my knowledge and working out, ive found the calculation for % growth to be '% increase = increase / original amount X 100'.
thats how i worked out each years growth earlier.  now...... is it as simple as that for say 5 years growth.  or 7?  
so in my examples earlier i worked out % growth each year to be 2.53, 1.39, 5.01, 5.34 and 5.21.
can i just add those together and divide by 5 to get a % figure for 5 years growth?  or does compound interest etc muddy the waters?
i ask as ive just experimented and it looks wrong. if i add those together and divide by 5, i dont get the same figure as if i just take the original and end figures only.

im just trying to work out an average of annual growth rate for my pension (over last 5 years), and compare that to my SIPP (over last 7 years).  or is that like comparing apples and oranges if its different time spans due to compound interest etc?

and if indeed it is the wrong way of looking at it, whats the best way to compare my pension growth to my SIPP?

thanks

MallyGirl

you are still ignoring this point:
So 5% reduction for every year you take it early - taking at 60 means you only get 75%.  Put it another way, every year you leave it you get 5% more.
Your DB will grow according to the rules but if you leave it alone you are also not losing 5% for each year you take it early. Your SIPP would have to grow by 5% plus CPI (or whatever your DB rules use) just to break even with the DB.