Early retirement. Income Sequencing plan.

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  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    PJM_62 wrote: »
    I figured the approach of building a SIPP pot while she is still working, with its tax relief bonus, was better than saving more into her ISA and supplementing the 10k DB with just ISA withdrawl ?

    What are you planning to invest in? Protecting the capital needs to be a primary obective. If you are going to achieve your objectives.
  • PJM_62
    PJM_62 Posts: 175 Forumite
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    The ISA funds are a mix of Vanguard LS60 & LS40.
    The DC pot is in the USS LS equivalent.
  • PJM_62
    PJM_62 Posts: 175 Forumite
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    crv1963 wrote: »
    Would the money from wife be better placed all in a SIPP as opposed to ISA? If she has enough earnings over time before retiring. My thinking is although it will be taxed as income the uplift of 25% would be greater than the increase in an ISA.

    She has about 3 years left before retiring. And in retirement will need the 8k top up for 12 years (before SP).
    Thats £96k. Which is coincidentally about 3 years pay :)

    How much of a £gain did you envisage in doing top up with just SIPP, over SIPP + ISA ?
  • crv1963
    crv1963 Posts: 1,372 Forumite
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    PJM_62 wrote: »
    She has about 3 years left before retiring. And in retirement will need the 8k top up for 12 years (before SP).
    Thats £96k. Which is coincidentally about 3 years pay :)

    How much of a £gain did you envisage in doing top up with just SIPP, over SIPP + ISA ?

    The ISA gets non uplift but can be taken tax free. The SIPP gets 25% uplift but taxed at 20% on the way out, on another thread I think that someone said that this gave a 6.25% advantage of Sipp over ISA. Worth looking at.
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
  • DT2001
    DT2001 Posts: 723 Forumite
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    From the previous thread swindiff calculated that you could get £63k out tax free (being 25% of the db pension, valued at 20 x £6.5k + your £19.5k lump sum and the DC pot of £100k). If that is correct by taking £8k p.a. which inc 25% tax free for 5 years are you worse off if you need to use the DC pot at anytime in the future?
    I am not sure if I fully understood the workings as it seems to be best to take the maximum lump sum, which can be invested in ISA’s, then draw up to your personal allowance from the residual DC pot and top up from the ISA’s. Most of the DC pot will then have been used but more left in the ISA fund.
    Maybe swindiff can advise?
  • PJM_62
    PJM_62 Posts: 175 Forumite
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    Yeah it's the sequencing I need to get right , to acheive most £ left in ISAs when at 67 we are using only DBs and SPs.

    SwinDiff ? ��
  • Triumph13
    Triumph13 Posts: 1,740 Forumite
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    As you will both be 55 at retirement, other than covering yourself for a possible rise in the pension access age (or decision to go a year or two early) there is no point in saving to ISAs rather than pensions. Even if the income is taxed when you take it out you make the 6.25% gain by using the pension: £80 net contribution => £100 in pension => £85 when withdrawn (25% tax free, 75% @20%).
    I would be looking at living on any existing savings to put as much income into pensions as possible - you can even get relief on income you didn't pay tax on.
    I would second the recommendation to look very closely indeed at whether taking DBs that early really makes sense.
    One other thought is have you obtained state pension estimates and factored in any voluntary NICs? With those DB schemes you are unlikely to be at the full single tier pension yet.
  • PJM_62
    PJM_62 Posts: 175 Forumite
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    Thanks.
    So it seems the advice is .. to contribute as much as possible for next 2/3 years into my work DC pot, and same for wife into her SIPP. Living of current ISA funds to enable this.

    At retirement, I don't take my DB pension + lump sum. Instead I use UFPLS to take my 18k per year, paying tax on about a third of it.

    Wife's 10k DB nhs pension is not reduced when paid at 55, so she may as well take that, and supplement with SIPP, before having to use ISA.
  • Johnnyboy11
    Johnnyboy11 Posts: 319 Forumite
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    PJM_62 wrote: »
    Thanks.
    So it seems the advice is .. to contribute as much as possible for next 2/3 years into my work DC pot, and same for wife into her SIPP. Living of current ISA funds to enable this.

    At retirement, I don't take my DB pension + lump sum. Instead I use UFPLS to take my 18k per year, paying tax on about a third of it.

    Wife's 10k DB nhs pension is not reduced when paid at 55, so she may as well take that, and supplement with SIPP, before having to use ISA.


    You sure about the wife's NHS pension being paid in full at 55?


    https://www.nhsbsa.nhs.uk/sites/default/files/2018-02/Early%20Retirement%20factsheet-20180201-%28V4%29.pdf
  • PJM_62
    PJM_62 Posts: 175 Forumite
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    Yeah she is one of the 'Special Class' nurses.
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