Best use of DB, DC, ISA, and savings for retirement at 60

ParkingEyeSore

Male just turned 60 and recently retired.

Enough cash in hand to last until end-April

DB - £24k p.a. if taken now.  £30k p.a. if I wait until 65.  

DB AVC £80k.  Passive in global equities.  I can take this as the DB TFLS without affecting the DB value.

DC - £240k.  Passive in global equities.

ISA - £420k.  A few individual shares.  Not very diverse.  Not exactly sure about dividends.  Probably £10k p.a. or less.

Share options - £60k gross profit on paper (£20k treated as capital gains, £40k treated as income).  I have to either take the profit, buy and hold, or sell enough to retain whats left by end May.

Pensions can be taken from age 55.

Earnings this tax year have taken me into the 40% bracket.

ISA allowance used this tax year.

Full state pension at 67.

Partner of 24 years aged 52.  Employed £12k p.a.  No significant pension.  Wants to continue working until at least 60.  Looking to return to her original more gainful occupation now that our children are older.

Two children living at home.  Age 20 employed.  Age 15 at school.
Both sets of parents are dead so no care home costs until we need them!

No mortgage.  Property worth approx £550k.  Needs about £20k in capital for essential maintenance/rennovation.  Could easily spend a lot more.

I have no plans to return to work but wouldn't rule out a part-time job for the social side and some additional pocket money.

No expensive hobbies but children are costly!

We haven't ruled out getting married as this will undoubtedly make our financial affairs simpler should one of us die.  We have made wills though.

Up until my recent retirement I thought that I would start taking my pensions from April this year.  I'm now not so sure.

I need draw enough to finance our normal living expenses which are about £36k p.a.

I am planning to speak to a close friend who had a career in banking/finance and pick their brains.  They are in a similar financial position but 5 years into retirement and have managed it all themself.

I am also thinking about using a financial advisor but I'm not sure if my position is complicated enough to make this value for money.

My thoughts now are maybe I should leave the DB pension/AVC, take the TFLS from my DC (approx £60k) and the share options and leave the rest invested.

Then use the ISA to fund our living expenses until I'm 65 and then take the pensions.

I thought I'd solicit some opinions (not advice) on here about how best and most tax efficient to take my pensions and use my savings.  Also any opinions on how to improve my partners situation using my funds.

Thanks in advance,

Cobbler_tone

I'd say that you are in a very good position (without knowing your full outgoings) to not have to worry about money again. That is of course unless you give it all away to the kids! You clearly don't need the DB now and always a balance of leaving it to get the maximum, with the great unknown mortality. You will see threads on here from some suggesting you should access the DB ASAP...but I think most of them smoke 60 a day. 
You may need to 'put a ring on it' to secure spousal provisions (check the terms of your DB scheme, don't rely on the Trustees), although depending on outgoings you will have a decent chunk of ISA left by the time your full DB kicks in. You could always invest in a pension for her. Assuming that giving up work immediately takes you out of any 40% worries.

AlanP_2

The first few things that come to mind are:

1) Pay as much as you need to in to your DC pot to avoid any 40% income tax being paid this year.

2) Pay the remainder of this years taxable salary in to your DC pot and get a minimum 6.25% uplift straightaway due to 20% tax relief on way in and effective 15% rate on way out.

3) Withdraw up to your Personal Allowance & applicable TFLS from your DC pot this tax year thus boosting the 6.25% in point 2 up a bit more.

4) Pay as much as you can afford and are allowed, in to a pension for your OH against the £12k income for this tax year and repeat in the future ideally.

5) Withdraw at least your personal allowance in taxable income in future tax years before DB and SP kick in.

Moonwolf

I think it partly depends on your final budget, goals, budget and attitude to risk. 

Personally, if not earning from 60, I would be tempted to draw down the maximum tax free from my DC scheme UFPLS style and take the rest of my income from the ISAs.  That way I'd be making the best use of my tax allowances.

From 65, with all those ISAs, do you need the tax free cash?  Surely better to use the tax free portion when drawing down to reduce income tax and perhaps at some point avoid the 40% tax rate.

ParkingEyeSore

Cobbler_tone said:

I'd say that you are in a very good position (without knowing your full outgoings) to not have to worry about money again. That is of course unless you give it all away to the kids! You clearly don't need the DB now and always a balance of leaving it to get the maximum, with the great unknown mortality. You will see threads on here from some suggesting you should access the DB ASAP...but I think most of them smoke 60 a day. 
You may need to 'put a ring on it' to secure spousal provisions (check the terms of your DB scheme, don't rely on the Trustees), although depending on outgoings you will have a decent chunk of ISA left by the time your full DB kicks in. You could always invest in a pension for her. Assuming that giving up work immediately takes you out of any 40% worries.

Yes very fortunate.  Mainly down to luck.  Worked for an employer who until recently had kept their DB scheme running although closed to new entrants.  Also benefitted from sharesave and share option schemes hence the large ISA.

£36k p.a. covers our living expenses.  I probably spend too much at the pub but that's my only extravagance.  I don't smoke and am in fairly good health.

The trustees of the scheme have historically treated partners the same as spouses and civil partners.

I won't be earning anymore this year.

ParkingEyeSore

AlanP_2 said:

The first few things that come to mind are:

1) Pay as much as you need to in to your DC pot to avoid any 40% income tax being paid this year.

2) Pay the remainder of this years taxable salary in to your DC pot and get a minimum 6.25% uplift straightaway due to 20% tax relief on way in and effective 15% rate on way out.

3) Withdraw up to your Personal Allowance & applicable TFLS from your DC pot this tax year thus boosting the 6.25% in point 2 up a bit more.

4) Pay as much as you can afford and are allowed, in to a pension for your OH against the £12k income for this tax year and repeat in the future ideally.

5) Withdraw at least your personal allowance in taxable income in future tax years before DB and SP kick in.

1. Already done that.  Went ove slightly.
2. No more salary to come.
3. Yes this is what I was thinking although I also have to factor in the earnings from share options so unlikely to have any personal allowance remaining.  Although if I leave the DC TFLS it might be larger at 65.
4. I will look into this.  Given that shes's actively looking for a new job this may have to wait.
5. Similar to 4 in that if I leave invested there might be significant growth.  Obviously the reverse is possible.

Cobbler_tone

ParkingEyeSore said:

Cobbler_tone said:

I'd say that you are in a very good position (without knowing your full outgoings) to not have to worry about money again. That is of course unless you give it all away to the kids! You clearly don't need the DB now and always a balance of leaving it to get the maximum, with the great unknown mortality. You will see threads on here from some suggesting you should access the DB ASAP...but I think most of them smoke 60 a day. 
You may need to 'put a ring on it' to secure spousal provisions (check the terms of your DB scheme, don't rely on the Trustees), although depending on outgoings you will have a decent chunk of ISA left by the time your full DB kicks in. You could always invest in a pension for her. Assuming that giving up work immediately takes you out of any 40% worries.

Yes very fortunate.  Mainly down to luck.  Worked for an employer who until recently had kept their DB scheme running although closed to new entrants.  Also benefitted from sharesave and share option schemes hence the large ISA.

Similar to me...closed to new members in 2010, closed to all (replaced by DC) in 2021. Also a great share scheme.

ParkingEyeSore

Moonwolf said:

I think it partly depends on your final budget, goals, budget and attitude to risk. 

Personally, if not earning from 60, I would be tempted to draw down the maximum tax free from my DC scheme UFPLS style and take the rest of my income from the ISAs.  That way I'd be making the best use of my tax allowances.

From 65, with all those ISAs, do you need the tax free cash?  Surely better to use the tax free portion when drawing down to reduce income tax and perhaps at some point avoid the 40% tax rate.

I like the sound of this.  I'm probably taking far too much risk with my ISA though and am going to look at moving out of a few single shares into a passive fund of some sort.

AlanP_2

2. No more salary to come.

I appreciate that but you can still pay 80% of your taxable salary for this year in to a SIPP and get tax relief as long as you do it in this tax year.

You need to check that Annual Allowance won't restrict you and then use savings to fund living expenses. 

ParkingEyeSore

AlanP_2 said:

2. No more salary to come.

I appreciate that but you can still pay 80% of your taxable salary for this year in to a SIPP and get tax relief as long as you do it in this tax year.

You need to check that Annual Allowance won't restrict you and then use savings to fund living expenses. 

Ah OK.  I didn't realise that.  I'll look into it. Thanks.

ParkingEyeSore

I had an initial meeting with a financial advisor at my bank.  This meeting was free but didn't really provide me with anything other than what I already know.  However they charge a one-off 2.75% capped at £10k if I choose to go back for tailored advice.  Also, the tailored advice is likely to involve a managed option which I'm sure they will assert can add value.  Without a guarantee of outperforming passive investments (which I doubt very much they or anyone would  give) I'm loathe to part with £10k + the additional annual management charge.