Playing the ball as it lies

Notfarfromtheborder

Hi, Have been thinking about things post budget and think we've managed to dodge most bullets, however, with us now being perilously close to certain allowances etc I'd welcome any thoughts or comments. Figures rounded but you'll get the gist

Me 57, OH 55, 
House paid
Full SP for both
Me £8K db scheme payable 65
OH £8K db scheme payable at 67 (as long as they work 5 more yrs as planned)
Me maybe stopping work somewhere between 6 months and 42 months. More than likely will be 18 months or 30 months
OH £18K pa pension in payment, earning £44k, contributing £12K pa into AVC to avoid HRT
Me earning £56K ish plus car, hc etc. sacrificing down to HRT. With employers conts £20K pa is been added to pension
Isas £45K each
DC pensions (both mine) £40K crystalized with TFLS taken, £635K uncrystallized)
Pensions maybe too conservative in funds with cash held in isa's / db pensions.  £450K equity (or close) £225K MM Funds (or close)

As tax bandings are not changing until 2031 that means that we wont see any future pay rises, they will be diverted into pensions.
Current take home circa £6K pm, spending £4K, saving 2K
Inflation will eat into spending power so £2K per month saving will decrease (along with cash Isa allowance)

As we are saving into pensions at £32K pa at present and will increase, my plan is to maybe take the TFLS element back each year to boost our monthly pay

Drawdown plan was to be aggressive and take out a few years at £67K ish pa to take tfls and pay tax at 20%, however I'd need a home for it, more difficult with isa (cash) cut but S&S still available. All current dc pensions in my name as OH just gone into 40% bracket.

We do have flexi isa allowance from previous tax years that would hoover up TFL  of £160K from current uncrystalied pot. If you have read previous posts this is still an itch I keep wanting to scratch (or maybe some and some). 

The whole plan for years was predicated on not paying 40% tax on my earnings and putting into pensions, I want to avoid paying 40% on the way out.

Thanks for reading

Thoughts??

HedgehogRulez

Retire now

Notfarfromtheborder

HedgehogRulez said:

Retire now

Has crossed my mind, don't think I'm ready yet. Management changes at work may help me refocus that thought

Secret2ndAccount

You can't carry forward flexi ISA allowance. Flexi means you can move money in and out within a tax year. Maximum net deposit is 20k in any year. (Each, of course)

Secret2ndAccount

Have you done any modelling of your drawdown plans? You should look at two scenarios at least:

Pick a retirement date, an inflation prediction, a growth prediction, a tax rules prediction... Then I suggest:

Scenario A:  Evaluate how much you can pay yourselves without exhausting your pot, if you limit your taxable incomes to 20% tax, and supplement with zero-tax amounts. Plan on at least one of you making it well into your 90’s.

Scenario B:  Same inflation, tax rules, etc, but this time let the spending run free and see how much you can pay yourselves without exhausting the pot. You have saved 40% tax on the way in, so it doesn’t have to be a problem to pay a bit of 30% tax on the way out (you still get 1/4 tax free). It would be foolish not to do this if it results in you being better off.

If Scenario A  pays you all you need, and you would like to leave an inheritance for someone, that’s one thing. If you would like to spend more, then it would be a mistake to let the tail wag the dog.

You should also now be able to see when you can retire – it wasn’t obvious from your post if you were working to fund your pension, or working because you want to.

You could easily need your pot to last 40 years. To keep place with inflation, you need some better investments. You already have DB income (with what inflation increases?) so you can afford to take risk to grow the pot. Move your ISAs into equities, because the growth will be tax free. Growth in the pension pots will be taxable when you withdraw.

At least look at some index linked gilts which can lock in inflation+1% or +2% for the long term. Very safe. Probably safer than an MMF.

Notfarfromtheborder

Secret2ndAccount said:

You can't carry forward flexi ISA allowance. Flexi means you can move money in and out within a tax year. Maximum net deposit is 20k in any year. (Each, of course)

If I withdrew £100k on 8th april, I can redeposit on 4th april, withdraw on 8th, April... This is what I was referring to.

Notfarfromtheborder

Secret2ndAccount said:

Have you done any modelling of your drawdown plans? You should look at two scenarios at least:

Pick a retirement date, an inflation prediction, a growth prediction, a tax rules prediction... Then I suggest:

Scenario A:  Evaluate how much you can pay yourselves without exhausting your pot, if you limit your taxable incomes to 20% tax, and supplement with zero-tax amounts. Plan on at least one of you making it well into your 90’s.

Scenario B:  Same inflation, tax rules, etc, but this time let the spending run free and see how much you can pay yourselves without exhausting the pot. You have saved 40% tax on the way in, so it doesn’t have to be a problem to pay a bit of 30% tax on the way out (you still get 1/4 tax free). It would be foolish not to do this if it results in you being better off.

If Scenario A  pays you all you need, and you would like to leave an inheritance for someone, that’s one thing. If you would like to spend more, then it would be a mistake to let the tail wag the dog.

You should also now be able to see when you can retire – it wasn’t obvious from your post if you were working to fund your pension, or working because you want to.

You could easily need your pot to last 40 years. To keep place with inflation, you need some better investments. You already have DB income (with what inflation increases?) so you can afford to take risk to grow the pot. Move your ISAs into equities, because the growth will be tax free. Growth in the pension pots will be taxable when you withdraw.

At least look at some index linked gilts which can lock in inflation+1% or +2% for the long term. Very safe. Probably safer than an MMF.

Thanks, yes dome some modeling, but maybe should do a bit more

Probably would like a bit more in the tank, OH happy to keep at it until at least 60

Equities in Isa is not something I had thought of, fair point re tax free gains. Would it be worthwhile taking all TFLS and getting the funds into S&S isas?

Previously avoided gilts as I haven't got to grips with them, took somewhat of an easy option with MMF. Maybe time to get up to speed.

cfw1994

Notfarfromtheborder said:

HedgehogRulez said:

Retire now

Has crossed my mind, don't think I'm ready yet. Management changes at work may help me refocus that thought

I honestly don’t think money is your challenge.
It is of course natural to worry that there will be enough, and this forum in particular does naturally focus a lot on that.

Maybe I am wrong, but I feel that you need to spend more time developing your plan for what your retirement will look like.

Everyone is different: some folk genuinely love their work and continue - good for them 💪
Some can’t wait, & have a thousand things they want to do to fill their days & weeks (I’m much more of this!) 😜
Others aren’t really sure what they will do 🤷‍♂️

Work that out, & you will realise that every day spent working is one less you that you cannot do those other things  👀

Plus: health troubles tend not to decrease as we age, sadly, & nobody has their epitaph as “I wish I’d spent more time at work” 🫣

Good luck 🙏

Notfarfromtheborder

cfw1994 said:

Notfarfromtheborder said:

HedgehogRulez said:

Retire now

Has crossed my mind, don't think I'm ready yet. Management changes at work may help me refocus that thought

I honestly don’t think money is your challenge.
It is of course natural to worry that there will be enough, and this forum in particular does naturally focus a lot on that.

Maybe I am wrong, but I feel that you need to spend more time developing your plan for what your retirement will look like.

Everyone is different: some folk genuinely love their work and continue - good for them 💪
Some can’t wait, & have a thousand things they want to do to fill their days & weeks (I’m much more of this!) 😜
Others aren’t really sure what they will do 🤷‍♂️

Work that out, & you will realise that every day spent working is one less you that you cannot do those other things  👀

Plus: health troubles tend not to decrease as we age, sadly, & nobody has their epitaph as “I wish I’d spent more time at work” 🫣

Good luck 🙏

Thankyou, I  probably recognize there is an element of truth in your observations