Retirement , have I planned correctly or …not!?

moral_shopworker

MarlowMallard said:

The obvious point is it's more tax-efficient to take out of the private pension from now to 67 and leave the ISAs for later.   After you turn 67, state pension will use up your personal allowance so withdrawals from pension will be partly taxable, but withdrawals from ISA should never be taxable, barring a war or similar disaster. 

You can take £16.7k per year out of private pension from now to 67 with no tax via "UFPLS",   25% is tax-free and the other 75% is inside your £12.5k personal allowance.  If you don't spend it all you can put surplus into ISA. 

Thanks for replying, so earlier up the thread I didn’t know what UFPLS was , now researched..and it does sound like how I was wanting to do do…maybe I need to do more reading to differentiate that from drawdown ?. I’m with Scottish W. when I spoke to them they explained it (drawdown) as the A)25% taxfree pot and the B)75% taxable pot… I then take from Pot A ) whatever value I choose to divide it into   and Pot B.)  stays invested ready to buy the annuity that will be 20%taxed fullstop (even if I never got an SP) that 75% is ALL taxable… and what I wanted to know was Pot A) still held with potential to grow …I guess it is?   Forgive me if I get this wrong… UFPLS is just accessing your pot at it’s value ,taking  from both A/B  getting 25% taxfree , but also taking from the  taxable part whilst I’m not working and taking advantage of the tax threshold  - mmm? that sounds like a huge loophole so I’m probably not understanding it - I just thought the 75% part was always taxed or is that because I’m assuming it’s usually only taken with SP taking you over the personal allowance. I clearly need to read up on everything again and this …at a reasonable hour of the day not 2.30am! I’ll be back!     

Tassie_Devil

moral_shopworker said:

MarlowMallard said:

The obvious point is it's more tax-efficient to take out of the private pension from now to 67 and leave the ISAs for later.   After you turn 67, state pension will use up your personal allowance so withdrawals from pension will be partly taxable, but withdrawals from ISA should never be taxable, barring a war or similar disaster. 

You can take £16.7k per year out of private pension from now to 67 with no tax via "UFPLS",   25% is tax-free and the other 75% is inside your £12.5k personal allowance.  If you don't spend it all you can put surplus into ISA. 

 I just thought the 75% part was always taxed or is that because I’m assuming it’s usually only taken with SP taking you over the personal allowance. 

Using your example the 75% is always taxable but whether you actually pay any tax depends on the whole of your annual income from all sources. If you don’t exceed the personal allowance you won’t pay tax. 

ali_bear

So you've had a bad time at work and quit. But don't write yourself off just yet. Have you thought about looking for work that you would actually enjoy? Something fulfilling or meaningful to you. Doesn't have to pay much if you like doing it, could be part-time. Or even volunteering. 

tacpot12

moral_shopworker said:

... It just doesn’t sit well for me … I nearly had a heart attack when I rang for a current pension value it was £152k and rang the following week in prep for my Pensionwise appt and it had dropped to £140k - yes, it has recovered but that feeling at the time of ‘all too risky’ I can’t cope with. ...

I understand the feeling! However, when I retired and started to draw down on my private pension, I decided that I liked the idea of mainly investing in companies (or Investment Trusts) that paid dividends. That way, the value of your pension is much less important. It doesn't matter if it drops from £152K to £140K, if you are still getting the same amount of income from it.

My retirement portfolio is invested in a range of investment trusts (and a couple of Exchange Traded Funds) that have been paying about 4.5% per year (after charges) and which have also grown by about 1.5% on average over the last 7 years; but the capital growth is relatively unimportant to me because I can afford to live of the 4.5% yield of the investments.

I currently withdraw money from my pension using UFLPLS. I use AJ Bell and find them very good. Every year or so I send them a secure message on their system asking them to increase the monthly withdrawal to adjust for inflation, and it just goes up. 

I agree with the other comments saying that drawing from you pension while you have unused personal income tax allowance and not withdrawing the tax-free lump sum is the best arrangement as it will save you quite a bit of tax once you start to draw your state retirement pension.  

moral_shopworker

ali_bear said:

So you've had a bad time at work and quit. But don't write yourself off just yet. Have you thought about looking for work that you would actually enjoy? Something fulfilling or meaningful to you. Doesn't have to pay much if you like doing it, could be part-time. Or even volunteering. 

Thank you, I think I poured my whole life so far into both jobs, and this really has knocked me for 6 , apart from this SSP for 6wks , I’d previously only had 4 wks sick my whole working life and that  last 6 wks in my head was ‘I’ve failed and let the system beat me’ , I have a lot to offer but my heart’s not in it. If I get my finances in order I  would really like to do volunteering in a charity based shop. Thanks for the encouragement!   

MarlowMallard

An addendum to above: yes "UFPLS" stands for "Uncrystallised Funds Pension Lump Sum". 
This means say you take out £16k as UFPLS,  then £4k is tax-free (does not count as income)  and £12k counts as "income" which is potentially taxable, but if your total taxable income for the tax year is under £12.5k you won't actually pay any income tax. You also get a £1k savings allowance for interest on non-ISA cash, may be larger if your total income is under £17k.   
The rest left behind in the pension pot remains "uncrystallised" and you can do UFPLS over again each year,  25% of what's left remains tax-free. 
 
If you just took 16k "tax-free cash", then £48k of what's left behind would move into a "crystallised" pot and whatever you take out of the £48k later would be income-taxable, so that looks less efficient for you than the UFPLS chunks. 

moral_shopworker

tacpot12 said:

moral_shopworker said:

... It just doesn’t sit well for me … I nearly had a heart attack when I rang for a current pension value it was £152k and rang the following week in prep for my Pensionwise appt and it had dropped to £140k - yes, it has recovered but that feeling at the time of ‘all too risky’ I can’t cope with. ...

I understand the feeling! However, when I retired and started to draw down on my private pension, I decided that I liked the idea of mainly investing in companies (or Investment Trusts) that paid dividends. That way, the value of your pension is much less important. It doesn't matter if it drops from £152K to £140K, if you are still getting the same amount of income from it.

My retirement portfolio is invested in a range of investment trusts (and a couple of Exchange Traded Funds) that have been paying about 4.5% per year (after charges) and which have also grown by about 1.5% on average over the last 7 years; but the capital growth is relatively unimportant to me because I can afford to live of the 4.5% yield of the investments.

I currently withdraw money from my pension using UFLPLS. I use AJ Bell and find them very good. Every year or so I send them a secure message on their system asking them to increase the monthly withdrawal to adjust for inflation, and it just goes up. 

I agree with the other comments saying that drawing from you pension while you have unused personal income tax allowance and not withdrawing the tax-free lump sum is the best arrangement as it will save you quite a bit of tax once you start to draw your state retirement pension.  

Thank you! Again a useful idea I’d not looked into.. it seems Pensionwise appts don’t actually cover some crucial options , they knew my situation and it was brushed off that I’d be the ‘usual retire at SP age’ , I get that time is short but at least telling me to maybe investigate it with an IFA would have helped me get more from the subsequent free IFA appt - but I went to that with ‘take the 25% lump sum etc’. He did mention investing some of my savings into similar as you describe ,I do struggle with the risk factor though , my old bank mgr described me as a ‘mattress banker’ , those were the days! Thanks for example figures and your experience, I will definitely gen up on this.  

moral_shopworker

MarlowMallard said:

An addendum to above: yes "UFPLS" stands for "Uncrystallised Funds Pension Lump Sum". 
This means say you take out £16k as UFPLS,  then £4k is tax-free (does not count as income)  and £12k counts as "income" which is potentially taxable, but if your total taxable income for the tax year is under £12.5k you won't actually pay any income tax. You also get a £1k savings allowance for interest on non-ISA cash, may be larger if your total income is under £17k.   
The rest left behind in the pension pot remains "uncrystallised" and you can do UFPLS over again each year,  25% of what's left remains tax-free. 
 
If you just took 16k "tax-free cash", then £48k of what's left behind would move into a "crystallised" pot and whatever you take out of the £48k later would be income-taxable, so that looks less efficient for you than the UFPLS chunks. 

Thanks, gosh.. eyeopener or what… my simple mind just assumed this;  Funds that you put in got tax relief so , you got have your pot…it’s been invested..it’s grown (thanks to the Gov input too) … you now ‘take’ it (any which way) but only 25% is tax free and the remaining 75% get taxed (because that’s the Gov getting a bit of payback from helping you out)    I do like a simple explanation .  I wrongly assumed it was a different ‘product’ (wrong word but..) that didn’t come under the umbrella of  income threshold. Which is why I’m going off with the idea of grab the lump sum tax free and it’ll help me out now and the remaining 75% remaining becomes taxable at SP age maybe as an annuity…of course it’s income..but in my head I’m paying the Gov back for the Tax relief and it’s not really income ….. Jeeze I’m so stupid.  I had a very late night reading up on UFPLS… and I’ll need to absorb it more because there’s things you shouldn’t do as in Crystallise etc..  and I’m now thinking about the £10kp.a MPAA alongside   … it’s would be from savings but clearly the tax relief would boost it (trumps available interest rates safely) , and it has potential to grow  - it seems counterproductive but can you see what I’m saying? 
 I’m feeling incredibly beep stupid and totally enlightened at the same time.   I absolutely can’t thank you enough for this, it is a game changer for me. 

moral_shopworker

Tassie_Devil said:

moral_shopworker said:

MarlowMallard said:

The obvious point is it's more tax-efficient to take out of the private pension from now to 67 and leave the ISAs for later.   After you turn 67, state pension will use up your personal allowance so withdrawals from pension will be partly taxable, but withdrawals from ISA should never be taxable, barring a war or similar disaster. 

You can take £16.7k per year out of private pension from now to 67 with no tax via "UFPLS",   25% is tax-free and the other 75% is inside your £12.5k personal allowance.  If you don't spend it all you can put surplus into ISA. 

 I just thought the 75% part was always taxed or is that because I’m assuming it’s usually only taken with SP taking you over the personal allowance. 

Using your example the 75% is always taxable but whether you actually pay any tax depends on the whole of your annual income from all sources. If you don’t exceed the personal allowance you won’t pay tax. 

Hi.. thank you for endorsing MarlowMallards reply , you’ll see there’s a reply on their follow up to me… have a read hahaha…I’m such an idiot , I thought I was pretty clued up , and I crashed on a rookie assumption of my own making.

moral_shopworker

kimwp said:

Dogs are expensive, so you will need a higher income than you are currently paying yourself.

Unless you have never used the NHS, including GP, NHS dentist and never used a library, happy to not have firefighters, police etc, then you have benefited from the public pot in the same way that people who legitimately claim benefits do. 

Hi, thank you for your input… I have addressed the cost of caring for a pet in the thread and will certainly be paying myself more to do so… however as it stands I never spend £450 a month on  ‘variable outgoings’ that I listed , so at present  wage is as stated.
 I’m not sure what you were implying with the 2nd part of your reply - so I shall hold off responding to it , when you reply on a keyboard it doesn’t come with  intonation…  but please be aware I took it as a ‘dig’ .