Approaching retirement - best beginner tips?

WillowLeaf

Editing………

hara____

One popular option is to contribute enough to bring your taxable pay down to below the 40% threshold. That way, if you can pay only 20% income tax when drawing the pension, it's very tax efficient. All depends, of course, on how much DB you will be getting?

You would also have to learn about 'pension input amounts' for your active DB scheme. That, plus any contributions to a DC pension, need to be kept within the annual allowance, or any excess covered by carry forward from previous years. This is one awkward aspect of making DB and DC contributions in parallel.

Albermarle

So to clarify;

You have a DB pension with your employer ( is this a public sector employer, if it would help if you say which scheme it is as probably some posters will be familiar with it) They have offered you the possibility to contribute to a DC pension organised by them ( sometimes referred to as an AVC pension) .

Sometimes AVCs can be linked to the DB scheme in an advantageous way, where there is the possibility of extracting more tax free cash. Sometimes they are not linked and in that case are no different to having a separate DC pension unconnected with the employer. Do you know what the arrangement is?

I can’t see any mention of my employers fees. I do see lots of pics in their brochure of silver haired golden oldies on beaches, so I know they’re selling something, which makes me suspicious.

Your employer will not have any fees, but the provider of the pension will have. Fees in general have reduced a lot in recent years but still something to keep an eye on . Pretty much all pension marketing literature features 60 somethings on world cruises etc so I would not read anything into that.

Also I could open a private pension (SIPP?) myself and just put net pay money in and claim the tax myself somehow? No idea how, or whether it’s better for the employer to do it all. Is opening a pension an easy thing, like opening a bank account? I'd have to pick a platform of some sort I guess.

If you open a SIPP instead, the provider will add basic rate tax relief. then you have to claim any higher rate relief due from HMRC. It is easy nowadays to open a new pension online, but the one on offer from your employer maybe fine.

squirrelpie

You've said you're working, and you've said you could take your pensions now, but you haven't said how you feel about your work. Do you love your work, or do you hate it? Or something in between? Do you have any circumstances that make you want to retire, or carry on? Do you have plans for what to do in retirement?

If you're prepared to say which bank you work for, there may well be somebody here who also works for them and who understands their pension scheme.

SacredStephan

Have you checked your state pension forecast, using your personal tax account / Govt Gateway?

DT2001

Start with a budget for retirement. Then work backwards from SPA when hopefully you will have a full entitlement. You can then work out how to fill the gap from retiring to that date - maybe your ISAs and cash savings. He can then see if it’s possible to retire now without, as you say worrying about unexpected bills etc. If you can’t you can then roll your forecast on 1 year at a time until you are comfortable with the results.
As sacredstaphan suggests do check your state pension forecast as you will probably have been contracted out of SERPS so may need more years contributions than some others.
I’d also check the terms of your first pension as it may have a GMP element. If so you need to know what happens with that if the pension is taken before NPA - I worked for Barclays in the 80’s and 90’s and I learnt each scheme has its own minor rule differences. Posters on here helped me to understand everything better.

kempiejon

It be an idea to start with when do you want/intend to stop working? A budget is a good starting point. As one approaches 55 unsheltered savings/investment spend that down to put the maximum allowable into pensions/SIPPs for a couple of years for tax efficiencies looks the better tax advantage. Being at lower rate of income in withdrawl and the 25% tax free can be manipulated. Plans change but I still think that's an efficient way to leverage the tax to your max advantage.

That's if continuing to work and not take the DB pension. As noticed salary sacrifice is another good way, if you can get further below higher rate then tax on savings and dividends are reduced too. You can sal sac and SIPP.

Veloflyer

https://forums.moneysavingexpert.com/discussion/comment/81867083#Comment_81867083

Perhaps it should come as no surprise but I am still amazed how many folk roughly my age now hate their work and cannot wait to retire. Have to say I am in a similar boat, but 30/40 years ago, whilst not exactly loving my job, I did at least find it stimulating and returned home thinking my working day had at least been worthwhile and beneficial. To answer the original question perhaps….

Save as much a feasibly possible and do claim for the higher rate rebate via HMRC if you can. I believe it is also retrospective. I use AJ Bell as a good low cost, easy to understand platform. When drawing pensions, my thinking to bridge the gap until SP kicks in is (if I need say 30K/ann) is to withdraw 72K - taking 18K in TFLS, then withdrawing 12K from the crystallized( taxable) bit. If no other income, then my tax bill should be nil. Repeat each year until SP kicks in then delete withdrawing from crystallized until uncrystallized runs out.

cfw1994

You are clearly asking mostly about finances, but my main tip for a happy retirement is figuring out how you intend to spend it 😎

What things will you (& partner if relevant) do to fill your time 🧐
Some of these will be free or very low cost - walking, cycling, reading, crafting, coffee with friends. Some won’t.
Try to visualise FutureYou™ without having to go into the bank 👀
Before I stepped away, I actually wrote a spreadsheet with the first column having a headline (DIY, craft, family, friends, culture, etc), with columns after it having things to do. Eg, Garden: greenhouse, veg bed, re-roof shed 🤓

It gave me something to look at over my first year and block in green when I did it. Okay, a bit nerdy, but it worked for me. Others might write lists. Whatever works for you 🙏

MallyGirl

https://forums.moneysavingexpert.com/discussion/comment/81867771#Comment_81867771

your gross pension contributions cannot exceed your earned income in the current tax year but it doesn't have to come directly from salary if you have some savings you would like to contribute

cfw1994

https://forums.moneysavingexpert.com/discussion/comment/81867783#Comment_81867783

I know what you mean….however, when you think of it as an ideas and possibilities list, things sound better!

I’ve not kept it going, but just had a look back at it, probs last edited about 2 years after I stepped away: the greens feel like accomplishment (blurred to protect the banality of it all🤣)

Even the red is underway: those were admin - wills & LPA. We’ve done the wills, so that’s a start (almost 5 years In 🫣)