To take TFLS maximum now or not?

LookingForAnAnswer

QrizB said:

There's a case to be made for taking the TFLS from the £1.1M pot, since any further growth will be taxable. Investing the TFLS elsewhere (eg. in ISAs) would probably give a better outcome, unless there's a significant increase in the £268k allowance.

With >£4M in assets, you might like to consider taking professional advice rather than asking a bunch of nobodies on the internet 🙂

His TFLS would be £275k. How would he invest it in ISAs where you have a £20k annual allowance?

westv

wjr4 said:

ali_bear said:

You could try https://adviserbook.co.uk/ and enter your postcode. 

If you were to take my advice and use half of your DC pot to buy an annuity, you should engage with an IFA to arrange that - you're likely to get a better deal overall (despite paying the IFA for the advice and execution he will be able to get you a better rate on the annuity). If he is any good he should also be able to advise on the rest of it   

Not all IFAs are male. 

I didn't get that assumption even though the post used "he" instead of "they"

westv

wjr4 said:

ali_bear said:

You could try https://adviserbook.co.uk/ and enter your postcode. 

If you were to take my advice and use half of your DC pot to buy an annuity, you should engage with an IFA to arrange that - you're likely to get a better deal overall (despite paying the IFA for the advice and execution he will be able to get you a better rate on the annuity). If he is any good he should also be able to advise on the rest of it   

Not all IFAs are male. 

I didn't get that assumption even though the post used "he" instead of "they"

logies

I thought it best to leave my wife’s pension to grow but perhaps it would be best to take the PA from it. 

Dazed_and_C0nfused

logies said:

I thought it best to leave my wife’s pension to grow but perhaps it would be best to take the PA from it. 

What about adding to it as well?

logies

Yes, been adding £2880 annually.

ali_bear

You know, the moment I pressed "Post Comment" my inner critic swooped on the use of "he" instead of "they" but I didn't think it was worth making an edit to correct myself   

QrizB

LookingForAnAnswer said:

His TFLS would be £275k.

His TFLS will not be £275k unless he's got a protected lump sum. It'll be £268k.

This is why taking it now is likely to be advantageous since it can grow outside the pension at a much-reduced tax liability.

LookingForAnAnswer said:

How would he invest it in ISAs where you have a £20k annual allowance?

The usual way ...

OP has £20k pa allowance, OP's wife has £20k pa, and (if he wants to start gifting it away) OP's kids each have £20k pa. It shouldn't take very many years to get it all sheltered.

In the meantime, CGT on investment growth in a GIA is lower than income tax from leaving it in the SIPP.

DRS1

QrizB said:

LookingForAnAnswer said:

His TFLS would be £275k.

His TFLS will not be £275k unless he's got a protected lump sum. It'll be £268k.

This is why taking it now is likely to be advantageous since it can grow outside the pension at a much-reduced tax liability.

LookingForAnAnswer said:

How would he invest it in ISAs where you have a £20k annual allowance?

The usual way ...

OP has £20k pa allowance, OP's wife has £20k pa, and (if he wants to start gifting it away) OP's kids each have £20k pa. It shouldn't take very many years to get it all sheltered.

In the meantime, CGT on investment growth in a GIA is lower than income tax from leaving it in the SIPP.

Which is why three "small pots" may suit him quite nicely.

And apart from ISAs there are always low coupon gilts.

Smudgeismydog

logies said:

Thanks for all the thoughts. I want to know how to draw down in a tax efficient manner (however that might be) and avoid any unnecessary IHT liabilities if possible.

My wife could draw down her personal allowance but her pot is small compared to mine so my instinct was to leave that be. I will have taxable income for the next few years which will use up my PA but it won’t be enough to live on.  I was thinking of taking the tax free cash and living off that as an interim measure. However, I am no expert in these matters and from what’s been said here I need some professional advice. But where to find trusted and good advice. That is part of the problem.

As @ukdw noted, why not take taxable income to fully utilise the 20% bracket? Once your state pensions are in payment, you will have less headroom to do this.

If this provides you with a combined income in excess of your expenditure requirements, you could consider making regular gifts. This would help with the IHT considerations.