Advice regarding my wife pension and drawdown strategy

Pat38493

squirrelpie said:

My wife and I have also always had separate bank accounts and have been very happy with that arrangement. But we've now set up a joint account that we both pay into every month and which pays our shared household bills (council tax, TV licence, electricity, water etc etc. That's so that when one of us eventually dies it will be easier for the survivor to continue payments without hassle. All the payments from that account go to accounts in both our names.

This is exactly what we have done as well - the idea is that if one of us dies, the payments of important bills like council tax etc won’t be frozen temporarily.

Mick70

squirrelpie said:

My wife and I have also always had separate bank accounts and have been very happy with that arrangement. But we've now set up a joint account that we both pay into every month and which pays our shared household bills (council tax, TV licence, electricity, water etc etc. That's so that when one of us eventually dies it will be easier for the survivor to continue payments without hassle. All the payments from that account go to accounts in both our names.

Thats a good point , without going off subject I deal with almost all  finances, bills etc and it is a concern what would happen if i pass away first  - worthy of a thread of its own as I imagine many couples have similar set up.

as say though for this subject i was just curious if we should be accessing the bank savings first before dipping into the pension for first 2 year say or just taking a mix from all 3 sources

BobR64

Mick70 said

as say though for this subject i was just curious if we should be accessing the bank savings first before dipping into the pension for first 2 year say or just taking a mix from all 3 sources

I think a couple of people have already mentioned this but if she doesn't have any other income, she should draw from the pension first up to her personal allowance as there is only a limited window of time when she will have the opportunity to withdraw this free of tax. Once she gets her state pension that will use up the allowance.

Mick70

BobR64 said:

Mick70 said

as say though for this subject i was just curious if we should be accessing the bank savings first before dipping into the pension for first 2 year say or just taking a mix from all 3 sources

I think a couple of people have already mentioned this but if she doesn't have any other income, she should draw from the pension first up to her personal allowance as there is only a limited window of time when she will have the opportunity to withdraw this free of tax. Once she gets her state pension that will use up the allowance.

that makes sense , although with 25% being tax free and if seeking a £15k pension in year1 then wont pay tax regardless how do it .  I was just unsure about holding so much cash back as it needs to be beating inflation , so i wasn't sure to just use the cash in years 1+2 and then mix from  all 3 sources -    cash/S+S ISA/Pension, but i don't know if i am missing anything obvious and that would be a mistake to go down that route

Pat38493

Mick70 said:

BobR64 said:

Mick70 said

as say though for this subject i was just curious if we should be accessing the bank savings first before dipping into the pension for first 2 year say or just taking a mix from all 3 sources

I think a couple of people have already mentioned this but if she doesn't have any other income, she should draw from the pension first up to her personal allowance as there is only a limited window of time when she will have the opportunity to withdraw this free of tax. Once she gets her state pension that will use up the allowance.

that makes sense , although with 25% being tax free and if seeking a £15k pension in year1 then wont pay tax regardless how do it .  I was just unsure about holding so much cash back as it needs to be beating inflation , so i wasn't sure to just use the cash in years 1+2 and then mix from  all 3 sources -    cash/S+S ISA/Pension, but i don't know if i am missing anything obvious and that would be a mistake to go down that route

If you are never planning to withdraw enough to pay any tax it's not a big deal, but keep in mind that fiscal drag (freezing of allowances) is set to continue until at least 2031, so eventually you may find that inflation catches up with you.

Based on the limited information you provided, personally I would still be looking to withdraw from the pension at the highest rate you can without paying any tax each year, so long as you can get all spare money into ISAs.  If you have a lot of money outside ISAs and you are paying savings tax interest, then maybe not.

My reasoning here is that all other things equal, I'd rather have the money in ISA than pension since it gives me full flexibility on spending if I need to make a large unexpected spend.  however for the sort of numbers you are talking about, I really don't think it's a big deal.  I would also be looking to empty the pension before SP age if it can be done without paying tax.

However as usual, some may disagree because  there are some nuances
- If your wife passed away before age 75, the DC pension can pass to you with no income tax liability, so that is a counter argument for keeping the money in the pension longer.
- I am assuming that the current plan to make pensions part of IHT next year is still going ahead and/or you will not be within the IHT regime either way (under the old rules, pensions were not parrt of inheritance tax, so there was more incentive to use the pensions last).
- Some might argue that having the money outside the pension makes it more tempting to make rash spending decisions (but frankly, it's actually very easy these days to make pension withdrawals from flexible providers so this is a bit of a psychological thing).

Albermarle

Mick70 said:

BobR64 said:

Mick70 said

as say though for this subject i was just curious if we should be accessing the bank savings first before dipping into the pension for first 2 year say or just taking a mix from all 3 sources

I think a couple of people have already mentioned this but if she doesn't have any other income, she should draw from the pension first up to her personal allowance as there is only a limited window of time when she will have the opportunity to withdraw this free of tax. Once she gets her state pension that will use up the allowance.

that makes sense , although with 25% being tax free and if seeking a £15k pension in year1 then wont pay tax regardless how do it .  I was just unsure about holding so much cash back as it needs to be beating inflation , so i wasn't sure to just use the cash in years 1+2 and then mix from  all 3 sources -    cash/S+S ISA/Pension, but i don't know if i am missing anything obvious and that would be a mistake to go down that route

Cash interest rates have been beating inflation for some time now. Probably if there are no big economic shocks, it seems likely that savings rates and inflation will be pretty close going forward. 
Of course I could be totally wrong, but it is also wrong to assume that cash will not beat inflation. It has done so during many different periods ( and not in others )

Mick70

thanks again for your replies, most helpful
BTW - the cash held in banks is not in ISAs , just ordinary bank savings accounts ,  only the stocks and shares one one is an ISA (vanguard)

ToneP

I found the following article helpful in explaining the pros & cons for the order of taking funds out.

https://www.brewin.co.uk/insights/isa-or-pension-which-should-i-take-first

Mick70

ToneP said:

I found the following article helpful in explaining the pros & cons for the order of taking funds out.

https://www.brewin.co.uk/insights/isa-or-pension-which-should-i-take-first

thank you will have a read later today,  think my bigger concern is whether to use the cash in the ordinary savings accounts first, or not