Paying £2880 into pension when retired
Comments
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I don't know that form specifically but in law:a friend wants to make a withdrawal but they have been sent a HL Flexible Drawdown application form.
Does this form work for either Drawdown and for UFPLS, or are there separate forms?
1. UFPLS is a form of flexible drawing
2. taking income from a pot that you've taken tax free cash from is a form of flexible drawing
3. taking tax free cash isn't a form of flexible drawing
So the form probably covers it.
HL tend to be helpful on the phone.0 -
You wrote an unconditional don't do it post, without describing your situation. What I replied with covered a range of cases in breadth that others can filter as needed for their own situation.I said my example was simplistic but you have massively overcomplicated the decision mostly with stuff that is irrelevant to my situation (& I am guessing to others).
For your specific situation:I don't have a pension pot or savings that I am going to drawdown in retirement. I won't be buying any annuities. There is no other money that I would be doing things with instead. I have a number of defined benefit pensions & I have a mortgage. For my own peace of mind I would rather draw my state pension as soon as possible & amongst other things pay off my mortgage earlier thus reducing my outgoings in retirement. I will hopefully live longer than the average but am prepared to forgo waiting seventeen years for a modest gain in pension for the certainty of money in hand.
You seem to have plenty of guaranteed income already and since spending tends to decline with age and you appear not to have other money, for you, not deferring looks like the right choice: it'll get you more money when you're most likely to be able to use it productively.0 -
Which is not a situation that you considered at all when giving your advice. There are many in my age cohort (currently at or near state pension age & with a good DB pension or pensions but no or few savings) so advising to defer state pension really isn't the best idea. Perhaps you should update your advice threads?You wrote an unconditional don't do it post, without describing your situation. What I replied with covered a range of cases in breadth that others can filter as needed for their own situation.
For your specific situation:
You seem to have plenty of guaranteed income already and since spending tends to decline with age and you appear not to have other money, for you, not deferring looks like the right choice: it'll get you more money when you're most likely to be able to use it productively.
Government actuaries carefully calculate how much pension is paid out over the remaining lifetime of the pensioner. Whether a state pension is deferred or not makes little difference to the Exchequer except in reducing current expenditure so there is no reason why someone should be rewarded for deferring. There is no free lunch.0 -
Perhaps reviewing the relevant parts of our discussion with some parts bolded will be useful:Which is not a situation that you considered at all when giving your advice.For those in normal good health who don't have plenty of guaranteed income I usually like deferring because it's a not particularly expensive way to get extra guaranteed income.I disagree. Take your pension just as soon as you are eligible.There are factors like low life expectancy that can make deferring a bad idea but it's a remarkably useful tool.I...stuff that is irrelevant to my situation (& I am guessing to others). ... I have a number of defined benefit pensions
As you can probably see, you're squarely in the do "have plenty of guaranteed income" mentioned in that first post of mine that you disagreed with. About a third of the text in the relevant paragraph is covering your situation and that of others similarly situated.For your specific situation: ... You seem to have plenty of guaranteed income already
Yes, there are and for them as well similar reasoning is quite likely to apply and make deferring the wrong choice for them.There are many in my age cohort (currently at or near state pension age & with a good DB pension or pensions but no or few savings) so advising to defer state pension really isn't the best idea.0 -
Lets consider where we're having this discussion:Perhaps you should update your advice threads?
"Paying £2880 into pension when retired" where the original post by nxdmsandkaskdjaqd contains the text:
'Jamesd wrote in another thread the following:
"She can make £720 a year tax free by paying 2880 net into a pension, having it grossed up to 3600 then withdrawing it ..." ... I have just retired at 60 and have transferred my DC pension to a new SIPP'
It's fairly likely that you're reading this because you're interested in the £180 that you might make if paying basic rate tax or the up to £720 that a person paying no or little income tax can make. You'll see from that first post that it's about a person who transferred out of DB quoting a post of mine addressing the situation of a person who I knew had a sufficiently low income not to pay any income tax when taking £3,600 of taxable income. Neither is likely to have "plenty of guaranteed income".
Another thread I link too quite a bit has this in its first post:
"have a reasonably large pot of money available and are using it to fund a high percentage of your living costs"
A person with little savings and lots of guaranteed income is unlikely to be in the group it's for, though some of the posts within it may be applicable.0 -
No free lunch but it can be a nice discount anyway. You might not have read the Government Actuaries Department analysis that got us 5.8%, nor updated views that suggest 5.8% is too high but I did and it's not just about population life expectancy and payback time for a person who lives to exactly the population's life expectancy. A couple of other factors considered are:Government actuaries carefully calculate how much pension is paid out over the remaining lifetime of the pensioner. Whether a state pension is deferred or not makes little difference to the Exchequer except in reducing current expenditure so there is no reason why someone should be rewarded for deferring. There is no free lunch.
1. Selection bias. The people with longer life expectancies are more likely to defer than those with shorter than population average life expectancies, so the cost to government is likely to be higher. Same general issue that tends to make deferring and annuity buying better value for women than men: the uniform price doesn't allow for the typical life expectancy difference but the buyer can consider it.
2. Means tested benefit cost savings. Some of those who defer will be kept out of means tested benefits due to their higher income.
For an individual rather than GAD there can be reasons to defer even when the expected return from deferring viewed in isolation is negative and this can reduce the selection bias effect that the GAD considers. Two potential ones are:
A. Longevity insurance. An individual might do it specifically to provide for the long life case and defer even when the expected return is low or negative.
B. Blanchett's work suggests that having a guaranteed income increase to a higher percentage of minimum income requirement can reduce the desirable success rate when using income drawdown. That in turn produces a higher expected total income for the individual.
Your own situation is fairly simple and not deferring looks good for you but for the GAD and others the nuances can make the choice more interesting.0 -
Having spent several hours getting my head around SIPPS, and skimming through the whole of this forum, I have now realised that I have been missing the opportunity to 'earn' £180 per annum for very little effort. I am retired, with no earned income, and intend to pay in £2880 per year, leave £1000 invested, and withdraw the remaining cash when the tax relief has been added.
Since the £1000 will remain in the account for many years, and therefore be significantly eroded by inflation, I am thinking of investing it in a fund, but have not seen any mention in this forum of keeping the long-term minimum amount in a fund, and wonder if I have missed something. I'm not seeking advice on which fund to invest in, just whether there are any disadvantages, other than the risk of a long bear market.0 -
I think your reference to £1k is probably in relation to using HL as the vehicle to undertake this option.
As far as I am aware the £1k rule only relates to the minimum account balance for the first 12 months. I haven't checked HL T&C for while so you may want to double check. One aspect of using HL for this whizz is that there are no account charges for withdrawal or for holding cash.Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0 -
I think your reference to £1k is probably in relation to using HL as the vehicle to undertake this option.
As far as I am aware the £1k rule only relates to the minimum account balance for the first 12 months. I haven't checked HL T&C for while so you may want to double check. One aspect of using HL for this whizz is that there are no account charges for withdrawal or for holding cash.
Yes, I have just set up an account with HL. I am happy to leave £1000 invested in a fund indefinitely, even though this may not be strictly necessary, as I can afford it and am not averse to the risk. The main issue is whether there are any disadvantages of doing this that I am not aware of, when the main purpose of having the SIPP is to generate an additional income of £180 p.a.0 -
You can do that if you wish. It would only cost you £4.50pa based on £1k in the account.JuliusCaesar wrote: »Yes, I have just set up an account with HL. I am happy to leave £1000 invested in a fund indefinitely, even though this may not be strictly necessary, as I can afford it and am not averse to the risk. The main issue is whether there are any disadvantages of doing this that I am not aware of, when the main purpose of having the SIPP is to generate an additional income of £180 p.a.
I think most people use this method to extract the maximum but for £4.50pa cost it is neither here nor there.Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0
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