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  • FIRST POST
    • DavidFx
    • By DavidFx 9th Nov 18, 11:50 AM
    • 221Posts
    • 127Thanks
    DavidFx
    Phased Drawdown Stategy
    • #1
    • 9th Nov 18, 11:50 AM
    Phased Drawdown Stategy 9th Nov 18 at 11:50 AM
    I'm 62 and in receipt of a DB pension of approx 30kpa.
    I also have a DC pot of some 240k.
    Presently, I don't need this DC pot money but I'm thinking that as I have approx 13k of basic rate allowance left, it would make sense to drawdown 13k per year and reinvest.
    So the plan is to drawdown 13k each year, pay tax at 20% and reinvest into the same funds.
    I would take the 25% tax free element at the beginning in case this benefit is removed in the future.
    I realise I could choose different funds but I am happy with the current ones and I would be no worse off than if I had left them where they were (apart from buying and selling costs).
    My question is - are there downsides to doing this (apart from the fact it is going to take 15+ years!)?
Page 1
    • Linton
    • By Linton 9th Nov 18, 11:59 AM
    • 9,970 Posts
    • 10,255 Thanks
    Linton
    • #2
    • 9th Nov 18, 11:59 AM
    • #2
    • 9th Nov 18, 11:59 AM
    - The money in the DC pension isnt part of your estate when you die. Drawing it down potentially increases IHT.

    - Once you get your SP, taking 13K each year would put you into the higher rate tax band. Though you could defer your SP to avoid this.
    • kidmugsy
    • By kidmugsy 9th Nov 18, 2:03 PM
    • 12,083 Posts
    • 8,529 Thanks
    kidmugsy
    • #3
    • 9th Nov 18, 2:03 PM
    • #3
    • 9th Nov 18, 2:03 PM
    Are you married?
    Free the dunston one next time too.
    • DavidFx
    • By DavidFx 9th Nov 18, 4:51 PM
    • 221 Posts
    • 127 Thanks
    DavidFx
    • #4
    • 9th Nov 18, 4:51 PM
    • #4
    • 9th Nov 18, 4:51 PM
    Are you married?
    Originally posted by kidmugsy

    Yes


    Linton: Would I be correct in saying that funds that are uncrystallised or in drawdown are treated to same for IHT purposes or I have I misunderstood this.
    • Albermarle
    • By Albermarle 9th Nov 18, 5:12 PM
    • 206 Posts
    • 103 Thanks
    Albermarle
    • #5
    • 9th Nov 18, 5:12 PM
    • #5
    • 9th Nov 18, 5:12 PM
    So the plan is to drawdown 13k each year, pay tax at 20% and reinvest into the same funds.
    You will miss out on 20% of any growth in the funds , although it will be a gradual effect.
    • zagfles
    • By zagfles 9th Nov 18, 5:44 PM
    • 13,561 Posts
    • 11,545 Thanks
    zagfles
    • #6
    • 9th Nov 18, 5:44 PM
    • #6
    • 9th Nov 18, 5:44 PM
    You will miss out on 20% of any growth in the funds , although it will be a gradual effect.
    Originally posted by Albermarle
    No he won't, assuming he invests in an ISA. Multiplication is commutative, and he'll have to pay 20% getting it out whenever as he has a DB scheme using up his PA. So makes no difference to him (though it might to his beneficiary if he dies).
    • zagfles
    • By zagfles 9th Nov 18, 5:49 PM
    • 13,561 Posts
    • 11,545 Thanks
    zagfles
    • #7
    • 9th Nov 18, 5:49 PM
    • #7
    • 9th Nov 18, 5:49 PM
    - The money in the DC pension isnt part of your estate when you die. Drawing it down potentially increases IHT.

    - Once you get your SP, taking 13K each year would put you into the higher rate tax band. Though you could defer your SP to avoid this.
    Originally posted by Linton
    Only just, assuming a full pension 30k+13k leaves 7k for the state pension based on next year's HRT threshold of 50k. Unless he's Scottish where they have a lower threshold I think.
    • Dazed and confused
    • By Dazed and confused 9th Nov 18, 6:34 PM
    • 3,220 Posts
    • 1,609 Thanks
    Dazed and confused
    • #8
    • 9th Nov 18, 6:34 PM
    • #8
    • 9th Nov 18, 6:34 PM
    I'm 62 and in receipt of a DB pension of approx 30kpa.
    I also have a DC pot of some 240k.
    Presently, I don't need this DC pot money but I'm thinking that as I have approx 13k of basic rate allowance left,
    I think the op probably is Scottish resident for tax as the figures don't make sense for someone in the rest of the UK, either this tax year (basic rate threshold 46,350) or next (50,000).

    Or maybe the op has other taxable income they haven't so far mentioned?
    • DavidFx
    • By DavidFx 9th Nov 18, 8:02 PM
    • 221 Posts
    • 127 Thanks
    DavidFx
    • #9
    • 9th Nov 18, 8:02 PM
    • #9
    • 9th Nov 18, 8:02 PM
    I'm English.
    Sorry, my mistake in getting the higher rate threshold wrong.
    I haven't paid the higher rate since retiring so I haven't followed the increases -but 50k next year will help.
    I have no other income
    • kidmugsy
    • By kidmugsy 9th Nov 18, 9:51 PM
    • 12,083 Posts
    • 8,529 Thanks
    kidmugsy
    I'm English.
    Sorry, my mistake in getting the higher rate threshold wrong.
    I haven't paid the higher rate since retiring so I haven't followed the increases -but 50k next year will help.
    I have no other income
    Originally posted by DavidFx
    If you were at risk of broaching the higher rate threshold by a modest amount when you start drawing State Retirement Pension, just make a suitable pension contribution to avoid it. The pension money can be passed tax-free to your widow if you die before 75. Or it can be left IHT-free to whomever you like. Or even if you draw it yourself you've made a small profit on the round trip.
    Free the dunston one next time too.
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