Gilts advice

JamTomorrow

https://forums.moneysavingexpert.com/discussion/comment/82167719#Comment_82167719

Very similar to my approach. I bought three more index-linked gilts yesterday, maturing 2039-2042, to see me through to State Pension age. They provide a real return of around 2.3%.

That leaves around 55% of my portfolio in global trackers, which I shouldn’t need to touch for about 15 years. If gilt yields remain favourable, I’ll replenish the rungs of the ladder at the far end as the earlier ones mature.

tigerspill

https://forums.moneysavingexpert.com/discussion/comment/82168707#Comment_82168707

Very similar - I am at 57/43 for equities/gilts&cash.

In each April, assuming equities and bonds hold up, I will be selling GIA equities up to the CGT allowances and moving the resulting funds to help top up my ISAs and purchasing more ILGs. I will do this each year to keep a similar timeframe with guaranteed (pretty much) yearly funds.

I am getting rid of all my non-gilt bonds as I am not sure they add anything to my plan. Happy to be challenged on this.

Justso65

To give more detail I am currently drawing my pension, aged 61, from a gilt ladder built to last to 67. My income is exactly on the lower rate tax limit to stop me paying 42% (Scottish) tax. I top up this income with a TFLS each year. So £43662 as a taxable income and £14554 as a TFLS each year.

I currently have circa £400000 in a Royal London scheme.

At 67 my gilt ladder will stop. At today's values I will then get a state pension of £12548 and a DB pension of circa £22000. So I am significantly below today's 42% tax band.

My wife, at today's rates, will be receiving an index linked Civil service pension of circa £12000. All tax free as it's below the tax free allowance. In 2035 that will be added to with a full state pension.

My intention at 67 is to then top up my State/DB pensions from however the £400k pot stands at that time. If at that time my top up requires me to enter higher rate tax areas then so be it. However, I will have a substantial amount of TFLS available from that £400K pot however it stands at 2032. My point is that I like to have certainty on how that pot will stand. Hence the gilts suggestion as that would give me a known amount. Returning my £400K and paying circa £110k in coupons. I would probably invest the coupons in either trackers or further gilts. I have yet to decide but my aim is to protect my current £400k pot and have a known increase in it.

DRS1

Does your DB pension come with a tax free lump sum (maybe called a PCLS)?

I may be adding up your lump sums wrong but 6 years at 14554 comes to 87324 and 25% of 400k is another 100k which leaves 80951 of the lump sum allowance spare. On its own that will allow for plenty of room for growth of the £400k pot but if the DB scheme has used up some of that 80951 then you might be thinking you need some of the growth to be outside the pension pot.

Justso65

https://forums.moneysavingexpert.com/discussion/comment/82169227#Comment_82169227

My DB pension has an optional PCLS or a higher pension instead. I would assess which option to take nearer the time based on how much of my tax free LTA I have available. However, you make a very good point. If I let my £400k pot grow to just over £500k at 67 with around £125k available tax free I don't have enough room left for my DB pension tax free option even as it stands today. So I need to make some TFLS decisions now or resign myself to not taking my DB PCLS.

DRS1

Sometimes you find the commutation rate under a DB Scheme is not very good so some people on here would say don't take the lump sum even if you weren't worried about the LSA. But it does come back to what would you do with the money and how healthy are you.