Most tax efficient way to withdraw money from all pensions pots

penners324

singhini said:

@MallyGirl i like your thinking

It must just be me, but IMHO that's 3 examples of rubbish DB pensions..... one paying £2k, another paying £3k and mine paying £4.5k 
Doesn't sound very impressive. 

EDIT:  In 15ish years time £4.5k wont get you a loaf of bread   Just remembered its index linked pension Doh! 

Heyho, i will stop my moaning 

It's £4500 per year for potentially 40+ years

singhini

penners324 said:

singhini said:

@MallyGirl i like your thinking

It must just be me, but IMHO that's 3 examples of rubbish DB pensions..... one paying £2k, another paying £3k and mine paying £4.5k 
Doesn't sound very impressive. 

EDIT:  In 15ish years time £4.5k wont get you a loaf of bread   Just remembered its index linked pension Doh! 

Heyho, i will stop my moaning 

It's £4500 per year for potentially 40+ years

Could potentially be just 1 year also (no guarantee)

singhini

penners324 said:

Can you live on £11k a year though? All bills, food and cat food won't leave much to do anything else

I'm looking in to what i'm currently living off and its about £16,000 each year at the moment.

Ive currently got £300k liquid cash so my maths suggest ive got enough to live off (£180k in ISA's + £120k from downsize property sale = £300k of liquid savings) 

I won't be able to spend that £300k by age 55 (which is when i will start to access my DC pots). Then aged 67 i will access state pension + my DB pot

Life plan:
I'm 53 now = Live off liquid Savings (LS)
54 = Live off LS
55 to 66 (12yrs)  = live off  LS + DC pension money of £16,760 each year
67 = state pension + DB pension + whats left in DC pots + whats left of  LS
Dead when im 80 (someone will inherit my house and whatever money / pension money i have)

Cobbler_tone

I reckon you’ll be fine Singhini.
Some on here need a couple of million before they feel ‘safe’, although of course everyone’s situation is different.
It’s easy to pick up a few hundred quid a month if needed.

squirrelpie

gm0 said:

https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/taking-your-whole-pension-in-one-go

Link / google "small pots / small lump sum rules" as it may interest you.  There are special arrangements to extinguish tiny pots below 15k.  The pot is emptied. 25% tax free.  The rest is in year taxable for income.  You could do them as is.  Nothing stopping you transferring and merging a few together still below 15k if you want or need a provider that does this vs some old scheme.  Partial consolidation.  Allowed 3 small pots.

Why do you say 15k? Everything I've read says a "small pot" is £10,000. Also, according to https://www.litrg.org.uk/pensions/pension-withdrawals/small-pensions you might be able to use the small pots rule more than three times, depending on the type of the pensions. It might be worth the OP investigating.

MallyGirl

it is £10k not £15k. The small pots rule gives no tax benefit as such - it just doesn't invoke the MPAA and so doesn't limit future pension contributions to £10k pa

artyboy

Cobbler_tone said:

artyboy said:

Hoenir said:

Cobbler_tone said:

You can take 25% of DB (tax free)

Are you sure that is statement is factually correct. 

I think we know that it isn't...

DB schemes each have their own rules that may or may not allow a tax free lump sum to be taken on commencement. But as there is no 'pot', the notion of it being any percentage is effectively meaningless - it simply represents a trade off with a reduction in monthly payments as a result.

"You can take 25% of 'my' DB (tax free) but the pension will also kick in…or leave it alone until you need it. Just make sure you check the scheme rules."

Better? The most important bit being "Just make sure you check the scheme rules."  

To really throw the cat amongst the pigeons...in my DB scheme the CETV value is also referred to as a 'pot'.   
Although the CETV won't have a direct correlation to the tax free lump sum, if an option. No issues with a CETV being referred to as a 'pot' at all, in fact I can't think of a better term.

I think the important thing is that the OP now realises that they need to consider their DB pension differently to their numerous DC ones.

Some real pedants.

I could point out that this isn't a proper sentence, but that would just be falling for your cunning trap... 

shortseller09

MallyGirl said:

it is £10k not £15k. The small pots rule gives no tax benefit as such - it just doesn't invoke the MPAA and so doesn't limit future pension contributions to £10k pa

There is a 25% tax-free benefit if you have exhausted your LSA.

QrizB

shortseller09 said:

MallyGirl said:

it is £10k not £15k. The small pots rule gives no tax benefit as such - it just doesn't invoke the MPAA and so doesn't limit future pension contributions to £10k pa

There is a 25% tax-free benefit if you have exhausted your LSA.

That doesn't seem particularly relevant to the OP, though.

bilko89

Hi everyone, had a good read through and I have a lot to learn it seems to make sure i get my pension right! I'm 35 at the moment but only just started to pay attention when it comes to retirement, in the hope I'll thank myself when I'm older.

Although I wish I'd done it sooner, I still have time on my side so want to ensure I'm saving correctly so that when it comes to withdrawing, I'm doing it in a tax efficient manner. The last thing I want to do is take advantage of tax relief paying in and paying it right back on the way out!

My current setup is standard workplace pension where I have £15K currently. I pay 5% (including tax relief) and my employer pays 3%. I've already asked and they won't up this no matter how much I increase to which is a shame. I was advised on these boards to look for another job but I really love it here and don't want to jeopardise my happiness by moving into a crappy one! No need to get into investment discussion for this thread but I've recently changed the Index Fund that was being invested in to another that should see me better in the long run. I will eventually increase my 5% as well to ensure I'm on target.

My plan is to start a S&S ISA in the next year or two and also pay into that. The limited material I've looked at says withdrawing from an ISA helps when used in conjunction with your standard pension to lower the amount I'm paying tax on.

I'm not banking on the state pension...so won't be including that in my workings, that will be a welcome bonus if it does survive the next few decades.

So, I guess my question is Workplace Pension + S&S ISA used in conjunction, can they save me on the tax when withdrawing in retirement? To withdraw what I currently take home per year I'll need a total of roughly £700K (using the 4% rule) which seems like a ridiculous figure but that will be my target.

Thanks