early retirment

grahamxxxxxxxxxx

Hi all

I am 60 now and want to retire now , i have a pension pot of 160k what is the best way to take it ? i have no other income and i dont want to pay tax so what take need to stay under the tax threashold till im 67.

Vitor

Nobody can tell you the best way to take the pension until you tell us what income you need and what your complete financial position is.

El_Torro

We all have a Personal Allowance of £12,570. Assuming you have no other taxable income and you don't take a tax free lump sum you can withdraw £16,760 a year from your pension without paying tax. This includes 25% of the withdrawal being non taxable. The rest will be taxable but you won't in effect pay any tax because you will still be within your Personal Allowance.

Is £16,760 a year enough for you to live on? Will the state pension plus the not very large amount left in your pension be enough to live on when you get to state pension age?

Marcon

https://forums.moneysavingexpert.com/discussion/6682016/early-retirment

Is this definitely a defined contribution (DC) scheme, where you have a pot of money (not to be confused with the 'cash equivalent transfer value' you'd have in a defined benefit scheme).

Does your provider allow 'phased drawdown'?

If you haven't a clue what that means, then it sounds as if your next step might be a free appointment with PensionWise to help you understand the options - and the jargon!

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise

Triumph13

Have you checked to make sure that you will qualify for a full state pension? If you do, you are probably looking at a sustainable income of something in the region of £15k pa. Is that enough to meet your needs?

ETA: Early retirement is great if you can afford it. You are going to burn through more than half of your pension pot bridging the gap to when your state pension starts. If you keep working until 67, even without saving any more, you'd be looking at something more like £20k pa post tax.

Albermarle

Although £160K might seem a lot - funding a long retirement ( you might well live another 30+ years) is an expensive business, especially if you retire many years before the state pension kicks in.

In your shoes I would be worrying less about tax and more about do I have enough money.

QrizB

I am 60 now and want to retire now

I know others have already said this, but how much income do you need to have the standard of retirement you want?

If you need £20k pa, for example, you're going to need £140k to get you from 60 to 67 and then £8k a year forever to top up your State Pension (and that's assuming you''ll get a full one - have you checked?). Which means a pot in the £3-400k range, not £160k.

£160k would probably let you retire on something like £14-15k a year. Is that enough?

Baldytyke88

If you take your 25% tax free(£40K) element of the pension and put it in an ISA, then take £12,570 from the remainder, which will be tax free.

You could also take an extra £2,880 and put that into a SIPP?

ali_bear

https://forums.moneysavingexpert.com/discussion/6682016/early-retirment

Slowly.

I put your numbers into the retirement modeller at this link https://www.guiide.co.uk/ and it says you could be taking a before-tax income of about £14k a year, rising with inflation until you are 75 (then staying at that level). Most of your pot gets used up in the period between now and when your state pension starts paying out. And it assumes you get the full state pension from 67.

Obviously if you worked even one year more, your pot will have fewer years to pay for in full, and will have grown over that time - especially if you can pay a bit more into it.

The way to take it is to crystallize the pot by taking the tax-free lump sum, then using drawdown to take the regular pension income (about £1150 per month before tax).

This does involve you paying a small amount of income tax, about £250 each year. If you really want to pay no tax then withdraw £12570 a year (£1047 per month).

LHW99

https://forums.moneysavingexpert.com/discussion/comment/82125104#Comment_82125104

The OP couldn't put £40k into an ISA now. Assuming they are going to have a low income that shouldn't matter (unless they have a lot of other non-ISA savings), but for others……

MEM62

I am 60 now and want to retire now , i have a pension pot of 160k

Starting with £160K and assuming an average market return of 5%, if you withdraw £16k a year it will last you until you are 74. From then on you are on the state pension alone. If you are OK surviving on that then you are good to go.