Am I missing any tricks in my retirement plan

Triumph13

I take it that you have checked that you will both be eligible for a full state pension?

Your UFPLS proposal thoroughly confused me too. It does seem very random for you to be trying to set your DC withdrawal level based on paying no more or less tax than precisely 20% of your DB income. Definitely the tail wagging the dog. Just accept that 75% of your DC is going to get taxed and set your actual withdrawals based purely on desired cashflow - ie don't take any more out than you plan to spend and/or can shelter in an ISA.

Subject to not paying 40% tax, I would be looking to take enough out of your DC pension to fully cover all living expenses until your wife retires, allowing her to put 100% of her earnings into a pension.

Small beer in the scheme of things, but it would be nice if your wife didn't have a year of personal allowance wasted. How easy that is to avoid will depend on when her birthday is. If it's July to March then she'll have earned enough from work in the tax year she turns 56. Worst case would be the day after her March payday :)

Pursuit

https://forums.moneysavingexpert.com/discussion/comment/81969465#Comment_81969465

It is not a desire to deplete, more a desire to not underspend. I think that in 4.5 years time, I will have my full state pension and that this further adds to limiting withdrawals and staying below the £50270. I have no desire to give HRMC 40% tax, so I want to take more of my DC earlier when it is easier to stay below the £50270.

My wife is basically still working in that 4.5 year period and in a reasonably good job. A position where one of us is still contributing to a pension and any downturn has an upside. 50k in cash protects me to some extent from sustained downturn, that and my DB could easily facilitate a £30k/year net income for 3 years.

In my limited mind I am trying to create a plan that is not be reckless but also allows me to be adventurous with my DC and not worry to much about a future that should be reasonably secure.

Pursuit

https://forums.moneysavingexpert.com/discussion/comment/81970082#Comment_81970082

I'm not sure I follow you on the 20% of my DB pension income. Can you break that down into numbers.

You cannot put 100% of your earning into a pension as far as I am aware. Something to do with minimum wage.

My wife will retire 30th Sept aged 56. 6 months after that I will have my state pension and my DB, probably about 34K combined. If things go well in the first 4.5 years we should be ok in the interim year between 56 (no income for my wife) and 57(access to her DC). If they are horrible years then she can continue to work in a well paid job. Its about being flexible enough to extract the maximum out of our personnel arrangement.

kermchem

You cannot put 100% of your earnings into a pension by salary sacrifice, as that results in your employer paying you less than the minimum wage. But you can pay all of your taxed income into a pension e.g., SIPP and receive tax relief on top, provided it is outside a salary sac scheme.

seacaitch

It is not a desire to deplete, more a desire to not underspend.

Savings represent "deferred spending". If you don't subsequently deplete those savings, then you are underspending and at the end of your life your remaining savings (the outstanding "deferred spending") will pass to someone else and become their spending.

There's absolutely nothing wrong with that of course, but if you yourself wish to "not underspend" then once any desired legacies have been set aside, that means spending and actually depleting the remaining balance of those savings. To perfectly "not underspend" requires depleting the whole lot (legacies aside) by the time you eventually kick it.

Triumph13

https://forums.moneysavingexpert.com/discussion/comment/81970511#Comment_81970511

If you stay within the 20% band, the tax you will pay is 20% x (DB + taxable DC withdrawals - Personal Allowance). You say you want to take UFPLS of £16,760 which would mean your taxable DC withdrawals would be exactly equal to the personal allowance. Your annual tax charge would therefore be 20% x DB.

As Kermchem explained, the minimum wage rule only applies to salary sacrifice. You can contribute 100% to a personal pension and many on here (or their spouses) have done so. You even get tax relief on the bit you didn't pay tax on because of personal allowance.

Good to see that your wife chose her birthday wisely :)

mrklaw

if you want to deny HMCR 40% (don’t do it just for spite but as tax planning it can make sense), then simply

1. withdraw via UFPLS whatever you need to live on, assuming that sits within basic rate
2. additionally withdraw up to 50270 gross, maxing your basic rate allowance, keeping effective tax to 15% and avoiding 40% tax. Move excess you don’t need for income into you and your wife’s ISAs (assuming there is capacity). if you use S&S ISAs with the same funds you had in your pension, they’ll grow just the same.

that avoids ever paying 40% tax including if you have unexpected costs like a new car/big holiday/new roof/gifts to family that in a normal year would require high DC drawdown - you build up ‘slowly’ while you have tax allowance available and spend from the ISA

Pursuit

https://forums.moneysavingexpert.com/discussion/comment/81971332#Comment_81971332

Outside of me not understanding that I could make my DB my main pension. The £16760 is a market downturn withdrawal amount, so that I maximise my tax free £12570. In other "good" years I will take far more than £16760.

NoMore

https://forums.moneysavingexpert.com/discussion/comment/81972328#Comment_81972328

As explained, the 16760 only maximises your tax free amount if you have no other source of income. With your DB pension greater than the personal allowance, drawing 16760 from your DC is an irrelevance for tax efficiency, you could draw more or less, it doesn't matter.

Just draw from your DC pension what you need plus maybe excess up to the max basic tax rate and save the excess in ISA.