Am I missing any tricks in my retirement plan

Pursuit

Hi All, I plan to retire this Sept aged 62.5. I believe I have a robust plan but do not want to miss anything simple that adds value to retirement income.

I currently have a DB of £16,400 that is in payment with the usual RPI/CPI built in and my DC is currently at £370k and I have another 6 months of payment of £3550 to go into this before I retire. My wife is 10years younger and earns about £48k/year. Her DC is currently £206k and the plan is for my wife to retire at 56 (for no other reason than it was meant to be 55 until the government changed the rules)

I will put £50k into a cash fund using that to cover 3 years of needing to withdraw £16760 UFPLS tax free in market downturns. For some reason I believe that using the previous years returns is a reasonable way to calculate withdrawals so in Sept I will use Sept 25- Sept 26 portfolio returns up to that point and withdraw the investment gain if any (currently sitting at 4.56% but there is another 6months to go)

I also intend to just take UFPLS in the early years so that when state pension kicks in and my ability to withdraw is more limited, I can use flexi access drawdown as a means of maintaining tax efficient withdrawal levels.

Given my DB and that my wife will continue to working almost to the point of my state pension age, I am of the opinion that we do not have to worry about ever running out of money.

We have zero savings it has been all about pensions and retirement up to this point. Am I/we missing any easy wins that we should be looking into?

NoMore

Taking 16760 UFPLS is only tax free for all of it, if you have no other income, you have a DB pension, so your Personal Allowance is already used up.

ali_bear

Assume you have already considered this but check you will not be paying any income tax at 40% for the current tax year. Because if that were going to be the case you would be advised to make greater DC fund contributions until you stop working to bring your taxable income under the 50k limit.

You'll always be at least a BR income tax payer.

leosayer

As mentioned earlier, your personal allowance is already used up by your DB pension so whatever further income you take will be taxed at 20% or more.

Having zero savings outside of pensions isn't great so I think you should aim to build this up by using ISA allowances and savings account. You and your wife can save £40k per year into ISA.

You can do this by taking income from your DC to fully utilise your basic rate tax bracket (£50,270). You said your DB is £16,400 so if you have no other income then this means you can take a further £33,870 of taxable income this year, along with the associated £11,290 tax free cash.

Pursuit

https://forums.moneysavingexpert.com/discussion/comment/81968238#Comment_81968238

I currently pay 20% tax on my DB, how will it change if I don't inform them I am retired and the UFPLS seems to assume that £16760 is my monthly salary and I just claim the over tax back off HRMC. Is that not how it works?

Pursuit

https://forums.moneysavingexpert.com/discussion/comment/81968252#Comment_81968252

Yep this is something I want to avoid, so I will always be looking to maximise any tax free cash I can to stay below the 40% tax band. When I leave work in Sept my payslip will indicate my total 6month take home pay and I will factor that in to what is left of the £50270

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81968350#Comment_81968350

You might find it simpler to just assume that all your Personal Allowance has been used elsewhere.

Whether that is by your current earnings or, in future, the DB pension the fact is it existing sources of income will always mean you have no Personal Allowance available for money taken from your DC pension.

You may want to organise it so your allowances are allocated to the DC pension but that won't change the underlying facts.

Pursuit

https://forums.moneysavingexpert.com/discussion/comment/81968320#Comment_81968320

I am not sure how the DB is meant to know I am retired and that the DB is my main/only income.

Going forward every withdrawal will be based on the previous years returns and limited to the £50270. I like this £11,290 tax free cash that UFPLS provides. Truthfully I want to maximise my tax free cash over my retirement, hence the desire to wait until the state pension kicks in before accessing drawdown.

Is the ISA/Savings thing only beneficial so that I have instant access to money, or are there further benefits to holding other money outside of my pension?

LHW99

We have zero savings it has been all about pensions and retirement up to this point.

Is the ISA/Savings thing only beneficial so that I have instant access to money, or are there further benefits to holding other money outside of my pension?

IMO it is important to have an emergency fund, whether working or retired, that you can access at reasonable speed without penalty. that could be an easy access account / ISA or a savings account run alongside your current account

Pursuit

https://forums.moneysavingexpert.com/discussion/comment/81968377#Comment_81968377

Thanks, I will set something up as an emergency fund. Is the ISA savings worth considering in order to manage the new IHT threshold.

NoMore

https://forums.moneysavingexpert.com/discussion/comment/81968365#Comment_81968365

Your DB income and your DC pension income will both be operating under PAYE, HMRC will assign them a tax code automatically when you first withdraw. You can change where the tax is drawn from, but it won't change your overall tax position.

Taking large one-off withdrawals from your DC pension could lead to an overpayment of tax, which could be returned by adjusting your tax codes or via a rebate. @Dazed_and_C0nfused is the tax expert who will no doubt correct me in exactly how it all works. :)