I take these articles with a pinch of salt.Originally Posted by JonRA
Everybody has totally different lifestyles.
I’m retired, I dont get near the figure quoted, I’m doing fine, 5 months of the year in Thailand too.
A lot depends on where you live in the country, size of house etc etc etc.
Totally agree...I imagine you find life in Thailand as cheap as chips compared to Blighty...well, as chips used to be.
Location is almost everything, that's why freedom of movement matters...less'n your lucky enough to be in the money is no object camp...Health too, another fundamental, whoever-however well heeled you are.
Last edited by Passenger; 7th February 2024 at 16:09.
Thanks for this - it adds useful context to the BBC item. And obviously, as has been said, individual factors and aspirations will vary.
If the average UK persons LIFETIME EARNINGS ARE 566k, ONS figure, then for the average/ man woman even a tolerable retirement may be mathematically impossible to achieve within the UK...might be worth bearing in mind for some. Good luck.
Start early, put away as much as you can and invest wisely. Only chance of getting anywhere near a decent pot.If the average UK persons LIFETIME EARNINGS ARE 566k, ONS figure, then for the average/ man woman even a tolerable retirement may be mathematically impossible to achieve within the UK...might be worth bearing in mind for some. Good luck.
Damn right. I read discussions are under way to potentially raise the state pension age to 71..now I'm fairly sure to many that the state pension up to about 200 quid a week, 10.5 k pa, is a useful top up but I imagine most would like the option to go earlier if they can and thus will make some kind of private provision alongside the state contributions...so they need to generate their own lets say additional 30 k income pa, 48k for a couple...lets assume 57 to 60 retirement target...pot of around 650,000 pays about 35 k. Quite a significant ask for the average earner on 566k lifetime...especially if they fancy owning a home / ave deposit 60 k, having children...estimated at 225k to age 18, but really how longs a piece of string...
Last edited by Passenger; 9th February 2024 at 16:52.
I think the reality is that most couples will retire on around £25k pa, £48k for most is a pipe dream. Then consider, as you have, having a family and buying a home and you can understand why paying into a pension pot isn’t a priority. Those people talking about investing wisely throughout your life have missed the point that the vast majority of people don’t have investments as they need all the cash they can get. So raising the state pension to 71 for now, on its trajectory to even higher, hits those who need it most.
Damn right. I read discussions are under way to potentially raise the state pension age to 71
I agree.
Start in childhood I reckon, 11 or 12 earning, saving...joke.
Last edited by Passenger; 9th February 2024 at 17:09.
Yep, We won’t see the likes of non contributory final salary schemes again! Both myself and wife never even thought about pensions until our fourties when we asked to start contributing to them! I guess we were very lucky but now both taken early retirement on a comfortable income.
Both sons in their twenties have decent pensions for their age as they started them when they were 18.
I know lots of people have other priorities but just saving a small amount from a young age is beneficial
In a couple of months' time, I will need to start taking money out of one of my pension pots (SIPP).
My first idea was to take a 25% tax-free sum up front and invest the rest for later drawdown. The lump sum would keep us going for the first 12 months. And I would then look at doing something similar next year with another pot.
However, I note that there is another option whereby you take a number of smaller lump sums, 25% of which is tax-free each time.
Are there any particular tax advantages in either of these over the other? My tax code will be the standard personal allowance from April.
Thanks all
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In a couple of months' time, I will need to start taking money out of one of my pension pots (SIPP).
My first idea was to take a 25% tax-free sum up front and invest the rest for later drawdown. The lump sum would keep us going for the first 12 months. And I would then look at doing something similar next year with another pot.
However, I note that there is another option whereby you take a number of smaller lump sums, 25% of which is tax-free each time.
Are there any particular tax advantages in either of these over the other? My tax code will be the standard personal allowance from April.
Thanks all
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If you don't need the cash up front I believe it's more efficient to do the second option, others could comment. Take a monthly or quarterly drawdown amounts with 25% of the amount tax free the rest at your nominal tax rate.
Disclaimer: I am not a tax accountant. I suggest you speak to a qualified IFA for advice.
In my case I took the full 25% tax free amount as needed the cash for a house purchase (effectively a self funded bridging loan). But I now have cash outside of a pension wrapper so potentially liable to income tax on any income made on the money - so think carefully.
Martyn.
“ Ford... you're turning into a penguin. Stop it.” HHGTTG
Agree with Martyn. Option 2 should* lead to greater tax savings over the full period of retirement as the undrawn fund continues to grow.
*assumes growth and no changes to the current tax laws.
Thank you, Martyn.
Food for thought - I need to speak to the SIPP company to see what options are available.
It's probably not a bad idea taking it in smaller sums.
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Thank you for this!
Yes, growth would be good, although we haven't seen much of that lately!
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If you have stopped working and have your personal allowance free to use, then taking around £16,000 pa from the pension with £4,000 as tax free and £12,000 as taxable but 0% if no other income, is the most tax efficient. Helps you get as much out at 0% an then retain some of the 25% tax free cash for later rather than use it all upfront.In a couple of months' time, I will need to start taking money out of one of my pension pots (SIPP).
My first idea was to take a 25% tax-free sum up front and invest the rest for later drawdown. The lump sum would keep us going for the first 12 months. And I would then look at doing something similar next year with another pot.
However, I note that there is another option whereby you take a number of smaller lump sums, 25% of which is tax-free each time.
Are there any particular tax advantages in either of these over the other? My tax code will be the standard personal allowance from April.
Thanks all
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this works for early retirees until the state pension start and then the £12000 at 0% tax gets eaten up by the £10,000+ state pension.
if you have other income still incoming or rental income that uses up the personal allowance this all becomes irrelevant. it works best where people have no other income and then possibly some cash to supplement and are able to get the full personal allowance sum out each year until state pension age.
Thank you!
That is a good explanation and makes sense.
However, we will need more than 16k to live on, and I am reluctant to draw on savings as we may need them later in the year to contribute towards a house move.
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well you can take more than £16,000 but will pay 20% on 75% of the difference (the other 25% would be from tax free cash still)
If you and your other half both have pensions to play with that can be £32,000 pa tax free. If you have a bit of time prior to drawing income and your partner has income you could also top up their pension to facilitate the same outcome.
I'm just about to put a chunk into a client's wife's pension as he has plenty and hers was underfunded but she has a reasonable salary and intends to pack up in just over a year; giving us 2 tax years worth of pension allowances to top hers up.
unfortunately there is only so much you can squeeze out, but that is the most efficient way.
Can you not take small chunks from your 25% tax free lump sum? So if you take your tax free allowance of £12,570 then top it up to whatever figure you want say to £30,000, therefore only £17,430 comes from your total 25% lump sum?
And all tax free?
If you take tax free amount then x3 that amount goes into crystalized funds. Upto 25% of total fund value in which case all the rest is crystallised - taxable at nominal rate. You can take bits out upto 25% all tax free - that’s what you are asking?
if you top up - wrinse and repeat for the added amounts.
“ Ford... you're turning into a penguin. Stop it.” HHGTTG
My intention was to do this - the so called UFPLS option of taking out regular small amounts as needed with 25% of the withdrawal tax free.
However, when I actually came to do it I found out that every withdrawal required me to book a 45 minute call with my SIPP provider so they could ensure I understood the consequences of taking out my own money.
Added to this I know that booking said appointment in the last 4-5 weeks of the tax year is almost impossible (with my SIPP provider at least), I decided on the single withdrawal approach.
This meant I had one “interview” call, the 25% tax free portion paid directly into my bank account (move to ISA or savings account if not needed immediately) with the rest moved into drawdown and remaining invested. Then when I want to withdraw more I just need to make a request online. Funds are sold from the drawdown account, money transferred and a payslip generated (still seems to take a couple of weeks though).
Beware of the tax implications. HMRC will divide your annual allowance by 12 and tax you accordingly, so if you have a one off large payment you will be taxed as if that payment is your monthly salary. Once you’ve overpaid tax it could be August of the following tax year before you get a refund.
I’m doing some part time work and trying to infill up to my tax free allowance by making SIPP withdrawals, so I know that I should be paying 0 tax. So far I’ve found it pretty impossible to avoid paying tax on the SIPP income, because the HMRC systems seem to assume that anyone with multiple income streams will use up their entire allowance with only one of them. I’m going to make one more withdrawal in March and see if it’s clever enough to comprehend the final month of the tax year.
Long story short - good luck!
Consider - if you will get better returns on your savings amount or more/less on that amount if you leave it in your pension pots.
Considet pension pots are outside IHT until you reach 75y old. Something else to consider - so you could bequeath your pot to your children and they get the pot totally tax free.
“ Ford... you're turning into a penguin. Stop it.” HHGTTG
If a new Government decides to reverse the current Government’s LTA changes (that is in their manifesto), presumably if you are 55 or over you can crystallise £1 from you pension to avoid any future LTA reductions?
No need to wait for tax refund. Complete form online (P55?) and should get it right away.
Yep mine took a couple of weeks
Pension pots in general are always outside IHT. If death occurs after age 75, the beneficiaries are taxed at their marginal income tax rate. Death before 75 then no taxes to pay.
Thanks! I’ll give that a go.
Would this mean hypothetically if you had say £1m in the pot (I certainly don't!) and died before 75, your child can in theory end up with that full £1m as cash-in-bank with no tax to pay at all? Or would they inherit the full pot untaxed but still get taxed as income when drawing from the pot? Thanks
There is no theory about it. It’s tax free taken as income or lump sum.
This is only for DC pensions where there is a “pot”, NOT final salary
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