have I missed something?

help_please_2013

Thanks in advance

I have taken early retirement at 55

I have approximately £700k in 2 pension funds

I currently have an income of around £30K

I am assuming once I take my state pension and private pension  I will be paying tax at 40%

I don't need to take my tax free lump sum yet

I want to make the most of the next 17 years of not paying 40% tax on my combined income

I am considering  taking  approximately 15k every year  out of my pension  fund for the next 17 years 

I think it makes sense to get some money out of my fund at 20% not 40%

Does this make financial sense ?

And does it effect when and how I can access my lump sum in any way(obviously I will have  a smaller fund) 

Cheers

  

MeteredOut

Where does the 17 years come from? At 55, you'll get your state pension at 67.

But yes, the general approach should be to maximum the use of the lower rate tax bands before starting your state pension (assuming you still have some allowance - you mention £30K income). A common approach will be to put those funds into an ISA. This can be a Cash ISA or a Stocks and Shares ISA, depending on your overall attitude to risk and what other investments you have.

Those that expect to have more income in the 40% tax bracket post state pension might also utilise the 20% rate in advance of state pension age too, to reduce the amount charged at 40% post state pension age. With £700K, you might want to look into this too. If your projected living costs sit below the 40% bracket, you can model your withdrawals taking that into account.

You just need to decide how you want to take your lump sum, and include that in your model. If you have no need for it, general recommendation is to not take it up front and just take 25% of each drawdown tax free.

NoMore

Where is the income of 30k coming from ? Is that separate to your dc pension drawdown ? 

help_please_2013

MeteredOut said:

Where does the 17 years come from? At 55, you'll get your state pension at 67.

But yes, the general approach should be to maximum the use of the lower rate tax bands before starting your state pension (assuming you still have some allowance - you mention £30K income). A common approach will be to put those funds into an ISA. This can be a Cash ISA or a Stocks and Shares ISA, depending on your overall attitude to risk and what other investments you have.

Those that expect to have more income in the 40% tax bracket post state pension might also utilise the 20% rate in advance of state pension age too, to reduce the amount charged at 40% post state pension age. With £700K, you might want to look into this too. If your projected living costs sit below the 40% bracket, you can model your withdrawals taking that into account.

You just need to decide how you want to take your lump sum, and include that in your model. If you have no need for it, general recommendation is to not take it up front and just take 25% of each drawdown tax free.

sorry meant 12 not 17 years

help_please_2013

NoMore said:

Where is the income of 30k coming from ? Is that separate to your dc pension drawdown ? 

the 30K is from savings and investments 

I'm not in drawdown 

MeteredOut

help_please_2013 said:

NoMore said:

Where is the income of 30k coming from ? Is that separate to your dc pension drawdown ? 

the 30K is from savings and investments 

I'm not in drawdown 

So its not income (ie. not annual)?

ian16527

Why dont you start drawing down from your pension to your tax allowance level plus 25% tax free so as not to lose the tax free income and top up with your savings to maintain your income level? 

ali_bear

Agree with the above. You need to make the most of your tax-free allowance every year so this will mean taking some taxable pension income. Then the general advice would be to use your savings and investments to supplement this income, leaving the bulk of your pensions until later. 

Have you checked your state pension forecast? 

You may have to do some modelling to check if you really will end up paying some 40% tax later. If so then increase the level of taxable pension income before the state pension kicks in. 

help_please_2013

ian16527 said:

Why dont you start drawing down from your pension to your tax allowance level plus 25% tax free so as not to lose the tax free income and top up with your savings to maintain your income level? 

i assumed you had to take your entire tax free lump sum before you started drawdown

help_please_2013

ali_bear said:

Agree with the above. You need to make the most of your tax-free allowance every year so this will mean taking some taxable pension income. Then the general advice would be to use your savings and investments to supplement this income, leaving the bulk of your pensions until later. 

Have you checked your state pension forecast? 

You may have to do some modelling to check if you really will end up paying some 40% tax later. If so then increase the level of taxable pension income before the state pension kicks in. 

I am definitely goin to be in the 40% tax bracket 

SarahB16

help_please_2013 said:

ali_bear said:

Agree with the above. You need to make the most of your tax-free allowance every year so this will mean taking some taxable pension income. Then the general advice would be to use your savings and investments to supplement this income, leaving the bulk of your pensions until later. 

Have you checked your state pension forecast? 

You may have to do some modelling to check if you really will end up paying some 40% tax later. If so then increase the level of taxable pension income before the state pension kicks in. 

I am definitely goin to be in the 40% tax bracket 

What makes you think that?

From what I can see you have £700k in a DC fund and will also have your state pension. You also have some savings that you will use as well.  

Are there any other pensions you haven't told us about as based on the above I don't see you as being in the 40% tax bracket. 

You do however refer to a private pension.  Is that a DB pension that is forecast to pay a significant amount per year in addition to your £700k DC fund and state pension?