Pension pot: how much is enough?

RandallFlagg

ToneControl said:

RandallFlagg said:

Just had some good news. I got a letter today, an updated statement and forecast from my preserved final salary pension and the tax free pension commencement lump sum I can take in 2 years from age 55 has increased from £32K to £35K and the annual taxable amount gone up £500 a year.

Feels like I just found £3K on the door mat!

the £500 pa is worth about £10k-£15k

or more as 50% of this pension is payable to the wife after my death until her death.

ESBlonde

@RandallFlagg why not delay the 25% tax free and increase contributions anyway?

You get the tax relief and each year means the 25% will be a bigger sum. Then only draw the % to cover your spendy house bits and leave the remainder to grow more with the larger conts. Say 15% as needed and the other 10% 5 years hence on a bigger(?) pot.

Snap

mark123 said:

hi  @viz and anyone else who can help
took a redundancy last yr 

Im 54 and ive got a 182k pension pot and another  seperate 32k pot
no debt and mortgage paid ,have my dads old house( paid) rented out £500 p.month
no kids

If i dont withdraw the 182k pot i can get 8k a year annuity
do not know what to do with the 32k pot ?

is it best to 
A. put both pots together ,182k+32k= 214k ,and drawdown ?
would i be guarannteed a 4% return in a low risk ?
Or do i take 8k a year inflation proof with 6k a year rent then what do i do with the 32 k pot ? 
i have enough savings not to touch any of these for 3 years
or do i use the 32k and leave the 182k pot and in 4 years see how much my annuity has gone up to,ive been told my anuity is low because i would be taking it at 55 and if i can wait 4/5  yr i should see a good increase in my annuity,is this right?

my heads busted 1 person says drawdown the other says anninuity

my outgoings inc fuel food etc are 800  p /month

Hi Mark, is the annuity inflation linked? Ie it goes up with inflation? That is paying 4.3%. At that rate, without the annuity and without investing, you could take that from your 182 for almost 23 years before it's all gone. That takes you to 77 years old. That's with no investment, just taking the 8k out of it a year. 
The annuity company will be investing your money with the aim of protecting the capital so that in reality it costs them nothing. For me, they are a con. You can't pass that money on in your estate either (though that may not bother you). You could get that return from a half decent investment.

I would consider lumping the 214 all together into a pension fund targeted to net you 4-5% after charges. That means growing at around 5-6 percent. You will be protecting your underlying capital this way which gives you some flexibility on what you draw.

You could then comfortably draw between 8500 and 10700 a year. This would be tax free too.

Then you have your rental income - the first 2500 of that is tax free (think that is correct).

remember you will have a state pension too at some point. 


Have you considered what your rental property is worth? If you sold it, would that release more money than 6k a year, less tax multiplied by how many years you reckon you will live? Be mindful of the fact that the sale of the house would be subject to capital gains tax (20% after your 12k allowance). Really it would have to be worth over 120k to even think about selling, probably.

I'd be thinking about talking to a few companies for advice. It's all free when they are trying to convince you of buying something, and you can quite easily walk away, no pressure to commit etc.

Maybe get a copy of Money Observer magazine too, see if they have a pensions special or similar. Get plenty of reading, and advice before you make a decision. Don't forget, we are all amateurs in here, me included!!


ultimately, it depends what will make you sleep most easily at night. If the prospect of a guaranteed income, forever, at a fixed rate is the answer - go for the annuity. Hold off doing it as long as poss as you will get a better return as they expect you to live less!

And also, it depends how much money you really need. Have you worked that out> what you spend etc?

Personally, I have handed all this stuff over to a financial company. I don't have the expertise, resources or time to do it justice.

RandallFlagg

ESBlonde said:

@RandallFlagg why not delay the 25% tax free and increase contributions anyway?

You get the tax relief and each year means the 25% will be a bigger sum. Then only draw the % to cover your spendy house bits and leave the remainder to grow more with the larger conts. Say 15% as needed and the other 10% 5 years hence on a bigger(?) pot.

The problem is that I can take the final salary (DB) pension at 55 but I don't want to start taking from the DC and want to carry on paying into it.

Taking the DB pension means I have to take the full tax free sum and start taking the annual taxable amounts but crucially it doesnt trigger money purchase annual allowance on my DC pension so I still have up tot £40K that I can pay into that scheme each year tax free.

I'm not sure if I can take from the DC pension while I'm still working and paying into it can I?

exocet

RandallFlagg said:

ESBlonde said:

@RandallFlagg why not delay the 25% tax free and increase contributions anyway?

You get the tax relief and each year means the 25% will be a bigger sum. Then only draw the % to cover your spendy house bits and leave the remainder to grow more with the larger conts. Say 15% as needed and the other 10% 5 years hence on a bigger(?) pot.

The problem is that I can take the final salary (DB) pension at 55 but I don't want to start taking from the DC and want to carry on paying into it.

Taking the DB pension means I have to take the full tax free sum and start taking the annual taxable amounts but crucially it doesnt trigger money purchase annual allowance on my DC pension so I still have up tot £40K that I can pay into that scheme each year tax free.

I'm not sure if I can take from the DC pension while I'm still working and paying into it can I?

I thought that there was a restriction on this whereby if you took the 25% tax free, your annual pension allowance drops from £40k to £4k?

RandallFlagg

exocet said:

RandallFlagg said:

ESBlonde said:

@RandallFlagg why not delay the 25% tax free and increase contributions anyway?

You get the tax relief and each year means the 25% will be a bigger sum. Then only draw the % to cover your spendy house bits and leave the remainder to grow more with the larger conts. Say 15% as needed and the other 10% 5 years hence on a bigger(?) pot.

The problem is that I can take the final salary (DB) pension at 55 but I don't want to start taking from the DC and want to carry on paying into it.

Taking the DB pension means I have to take the full tax free sum and start taking the annual taxable amounts but crucially it doesnt trigger money purchase annual allowance on my DC pension so I still have up tot £40K that I can pay into that scheme each year tax free.

I'm not sure if I can take from the DC pension while I'm still working and paying into it can I?

I thought that there was a restriction on this whereby if you took the 25% tax free, your annual pension allowance drops from £40k to £4k?

There is, but taking benefits from a final salary pension does not affect your money purchase annual allowance, it allows you to keep paying in up to £40K. (taking benefits from a defined contribution pension, over the 25% tax free pension lump sum does though and reduces it to £4K)

But it appears that taking the tax free lump sum from my final salary pension means I can't make any significant increases in my contributions to my DC pension as it could be viewed as pension recycling. Just had a webchat with Pension Advisory Service and they have confimred this is a risk so I need to replan accordingly.

https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/the-annual-allowance

 

ToneControl

RandallFlagg said:

exocet said:

RandallFlagg said:

ESBlonde said:

@RandallFlagg why not delay the 25% tax free and increase contributions anyway?

You get the tax relief and each year means the 25% will be a bigger sum. Then only draw the % to cover your spendy house bits and leave the remainder to grow more with the larger conts. Say 15% as needed and the other 10% 5 years hence on a bigger(?) pot.

The problem is that I can take the final salary (DB) pension at 55 but I don't want to start taking from the DC and want to carry on paying into it.

Taking the DB pension means I have to take the full tax free sum and start taking the annual taxable amounts but crucially it doesnt trigger money purchase annual allowance on my DC pension so I still have up tot £40K that I can pay into that scheme each year tax free.

I'm not sure if I can take from the DC pension while I'm still working and paying into it can I?

I thought that there was a restriction on this whereby if you took the 25% tax free, your annual pension allowance drops from £40k to £4k?

There is, but taking benefits from a final salary pension does not affect your money purchase annual allowance, it allows you to keep paying in up to £40K. (taking benefits from a defined contribution pension, over the 25% tax free pension lump sum does though and reduces it to £4K)

But it appears that taking the tax free lump sum from my final salary pension means I can't make any significant increases in my contributions to my DC pension as it could be viewed as pension recycling. Just had a webchat with Pension Advisory Service and they have confimred this is a risk so I need to replan accordingly.

https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/the-annual-allowance

 

and how many people know about that?
Try asking a financial advisor about it, to see if they know their stuff

steveledzep

All the willy-waving has stopped.

Viagra anyone ?

ToneControl

steveledzep said:

All the willy-waving has stopped.

Viagra anyone ?

I'm too busy!
I had all my pension pot in cash until 10 days ago
Currently trying to invest well to vastly reduce the time left before I can retire

RandallFlagg

steveledzep said:

All the willy-waving has stopped.

Viagra anyone ?

my willy is smaller than it was...

Musicwolf

Funds up and down more than usual (mostly down) so I'm probably around 25% down in total (or about £60k).  Fortunately my main pension is defined benefits.

I'm several years off needing to cash in, so time for recovery.  Many more ups and downs to come over the next couple of years I would guess.

Heartfeltdawn

I feel like starting up a thread for those of us with sod all pension entitled "Dignitas at 65: how much will I need?"

TTony

Heartfeltdawn said:

I feel like starting up a thread for those of us with sod all pension entitled "Dignitas at 65: how much will I need?"

Its ok.  We’ll all chip in to make sure you get there.