Hope you've enjoyed this video - let me know in the comments. And if you are wondering why you might NOT want to take your pension tax-free cash, consider my previous video: 🔴 ruclips.net/video/RvtFdEOZLnc/видео.html - 5 Reasons NOT To Take Your Pension TAX-FREE CASH
Hi Pete, I have a pension that has been frozen for 22 yrs, its up to around 53 thousand I've been advised I can take 25% tax free the other 75% would be taxed does that sound right ??
Hi Pete, very interesting but now of course the LTA is unlimited so is it worth taking the full amount before the socialists get back in and reverse the LTA change? If you take it now and invest it surely that makes more sense?
Increasing tax rates are the reason I rolled over my 401k to a Roth. I don’t want to be 59 paying taxes on current income on withdrawals made from my retirement account.
Effective personal finance management matters more than the income source, whether from a job or investments. A certified financial advisor can offer tailored guidance to reduce expenses and boost income, optimizing your financial situation.
I completely agree; I have approximately $650k in external retirement funds. I am debt free and have very little money in retirement funds compared to the total value of my portfolio over the past three years. To be honest, the Fin-advisor can only be neglected, not rejected. Just do your due diligence to identify a fiduciary one.
Not going to work for everyone but my plan it to take the tax free when I hit 55. If I don't mess up how I use/invest the money ;) the reasons are 1) Puts me in a position to reduce my mortgage, significantly, and potentially paying it off a lot earlier. 1.1) The money I save from clearing the mortgage is, potentially, more than the return I can expect between 55-67 on the pension so I may actually be slightly better off taking it. 2) Allows us to get ready for retirement (house upgrades, etc.) without leaving them all until I'm retired. 3) Can actually live now, instead of getting by, until retirement. In terms of actual retirement I should still be comfortable from my projected pension, and arguably fall in to "well off".
I've just retired at 55. I took the tax free lump sum for one reason. I'm single and bought and paid off my home. I paid everything myself but in doing so I basically lived month to month and never had any savings at all. I took the lump sum as I finally have something to fall back on.
When we were dealing with an estate we found that the maximum tax free lump sum had been taken, so reducing the pension in payment. However, the survivor benefits/widow's pension were based on the original sum , which was nice surprise. So sometimes taking more cash isn't a bad thing for survivors depending on the scheme.
Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got to talking about investment and money. I started investing with $150k and in the first 2 months, my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and get more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.
Hi. I’ve been forced to find additional sources of income as I got retrenched. I barely have time to continue trading and watch my investments since I had my second child. Do you think I should take a break for a while from the market and focus on other things or return whenever I have free time or is it a continuous process? Thanks
@@Donnafrank-k6e However, if you do not have access to a professional like Clementina Abate Russo, quitting your job to focus on trading may not be the best approach. It is important to consider all options and seek guidance from reliable sources before making any major decisions. Consulting with an AI or using automated trading systems can also be helpful in managing investments while balancing other commitments.
Take the money! You may not need all 25% but I believe we will be the last few allowed to get 25% tax free on entire pot. Government will introduce threshold (heard 400k pot) that will allow you just 100k tax free.
This was really helpful and as clear as this complex subject can be! Something that you didn't mention specifically is life expectancy - if your health is such that you don't expect to live long in retirement then taking the maximum tax free money up front may also make sense.
This is exactly why I intend to take the max lump sum at around 57yrs old, both myself and wife have health issues and are on medications that knock at least 10yrs off our lifespans so it seems silly not to, we can still use some in a higher interest account to boost our income a bit....
I am 3 years away from taking the UK state pension with a potential combined pension pot around the national average of 64K. Making the right decision is very tricky & this all sounds very complicated to me.
Hi Pete,thanks for the video,it helps I think.I’ve been grappling with my pru pension for months,probably two years, we moved to Australia thirteen years ago and about three years ago got a letter saying they were freezing the pension because we had lived outside the country for over x amount of years.I have ten years left and think it would be better to put it in a SMSF , (supa pension fund) and try to grow it as its just sits there in the uk ,any thoughts would be helpful thanks
I think one really good reason to take all of your tax free amount (your own personal max amount) is because it's done, you can drip feed it into ISAs etc. And once it's done labour can't reduce the amount you can take as you have already taken it. you can still draw down your non tax free cash up to the £12500 tax free income level and use some of the invested cash tax free withdrawal you made and, in effect, pay no tax on either amount.
6:40 Ref reason #5. It is not logical to advise taking a lump sum simply to mitigate Tax within a DB pension. The DB fund is inexhaustible so why be concerned about how much is taken on tax? Focus should be on getting the most net pay irrespective of taxation. Lets face it, DB pension money is unlike a normal salary. It is not money that has been hard earned through work, it does not diminish, so who cares how much tax is taken?
I have a West Midlands Pension Fund pension, paid in for 237 years and retired a month ago at 55. Im still deciding on the 2 options they have given me - 15000 lump sum and 8.500 annuity, or 45000 lump sum and 6.500 annuity. I have to have the annuity which at least is guaranteed income. Is the annuity taxed? I have no kids, no mortgage. I look after my dad who is 90 now so wanted to spend time with him. Shall i take the higher lump sum and invest half in a fixed ISA for 5 years, and the other half in a savings account with limited access, and just keeping some back for paying off credit card and other smaller debts. I need to complete the form but still trying to understand all this, but have no spare money so need to sort it out soon.
Just recived some tax free cash this morning I am effected by S24 and the tax free income dosent make me worse off I am staying fully invested and just takeing what I need per month I also own a company so my company will be paying more cash into my SIPP Pensions are great and you dont really know how good they are untill some cash comes into your account month after month
Thanks for the advice and I get all the pros for leaving the tax free lump where it does the most good growth wise but with so much political wavering over pensioners and their pensions I worry that at some point our next government (labour most likely) might withdraw the 25% tax free option. Do you have any views on this prospect?
I’ve been an adviser for 26 years and this has been mooted before every budget and every change of government. Yes, it might happen, but I’ll always counsel caution in making big decisions based on what *might* happen.
With a defined benefit pension, when you draw the pension it is treated as normal income. So not taking the tax free lump sum will result in the whole amount being taxed. e.g. Total pension = £20,000 you are taxed on the whole amount, reduced pension £15,000 + £90,000 tax free lump sum. You will only pay tax on the £15,000. Surely this makes it obvious to take the lump sum from a defined benefit pension.
I’d say that’s a good reason to take the tax-free cash, yes. But there are reasons not to, as well… I’d always be wary of letting the tax tail was the dog, so to speak…
Absolutely right that everyone needs to analyse their own situation. One small point you missed is utilising the 7 year period for PET to reduce IHT; for the few who are very well provided for this can help ( as can giving from spare income- an efficient form of IHT reduction for the fortunate )
Great advice, thank you! Say I have a DC pension with a pot of £500k and want to pay zero tax going forward at the point of retirement. My current plan is to take £125k tax free and then draw £12,500 pa from the remaining pot of £375k. I will then split the £125k over 10 years to get me to state pension age, giving my an annual income of £25k for those 10 years. Is there a more effective way to take out funds that gives me £25k pa after tax? Can I state that I want to take the £125k tax free amount over the 10 years at £12,500 pa therefore leaving it to continue growing, or does it get converted to cash at the start of withdrawal process?
You’d need to take the cash, bank it and draw off it for ten years. The only way you can have £125k tax-free is if you crystallise the whole pot in one go. It may make more sense to crystallise in chunks. But what you suggest is probably the only way to have £25k per year tax-free.
I am 61 and wish to take early retirement. I have worked at the same higher education institution all my life, and been paying into the LPF since 1980. Do I have any protection regarding what was Rule 85, which existed until 2006?
Thanks for you excellent videos. If you don't need the cash in a DC pension (I'm 64), but want to take the 25% because of the upcoming budget, would it make sense to invest in short term low coupon gilts, which yield 3.5%+ tax free? This seems a safe way to grow the drawdown amount at a reasonable level without incurring tax bill.
I have a Railway pension, but the current pension provider has changed & a large chunk of my pension (£12,000), seems to have disappeared, what’s going on??
Thanks. A question on number 2. If you took tax free cash out of your db pension to buy an annuity, at some point does the returns on that annuity qualify or come into paying tax equations?
One of my pensions is in a PPF scheme. I'm struggling to see why my 25% tax free is more like 20%. Also i can no longer see my total amount in the scheme. I'm 55 this year and really need to get my house in order.
The problem with taking cash is in a few years it's gone and forgotten. But leaving it in your pension in 10 or 20 years you will still be getting that extra pension and the yearly increase is more .
Not if I pay my mortgage off. I will be immediately £400 a month better off for the next 13 years. Assuming the property value will grow and of course a pension pot is not the only place to invest your extra money. As soon as the kids leave home we will downsize and move to an EU country where the cost of living is cheaper.
Another consideration is where there is a spouse or partner who has unused allowances that you could make work for you as a pair. For example you could take tax free cash of £7,499 and pay it into the pension of your spouse or partner who perhaps could usefully have a larger pension pot. At this level you would avoid the pension lump sum recycling rules and with better advice and planning perhaps even put in more than £7,500. You might also want to use their unused ISA allowance. I am thinking mainly about circumstances where one partner has a large pension and possibly other taxable income, maybe pushing them into higher rates of tax and the other partner has much less income enabling a transfer of income from one to the other at a lower or even nil rate. When I say income I mean projected future income as well as the here and now.
Why do you think pensions are so great? I just checked my work pension and for the period Dec 2021 to May 2022, the fund actually lost MORE money than was paid in my myself and my employer - we both pay in 6%. The fund is actually worth over £500 less now, than it was in Dec 2021 ergo, everything paid in for that period has gone too.
So what you're saying is that it is now cheaper for you to invest in your pension: stocks and shares are on sale. This is a good thing whilst you are still saving. Everything you pay into your pension is tax free: so that £500 only cost you about £250. The only downside to a pension is that you can't touch it until you are 55 (currently, the law might change). A semi-downside is that once you draw even a penny from your pension the amount you can pay in collapses from £40K a year to a miserly £4K a year.
Here’s the reply I added to your similar comment on the other video, Chris: People don’t trust pensions because they don’t understand them. Every time money has gone in since December, you’ve been buying shares or whatever at lower and lower prices, meaning you’re buying more of them. When markets come around - and they ALWAYS do - you’ll see a marked increase in the value of your holding. What you’re doing is exactly the right strategy - keep buying regularly, and some of it with money that isn’t even yours! Depending on how old you are, this may be your first serious market correction. There will be many more in future - keep investing and your future self will thank you.
My Scottish Widows work pension is worth £65k less than what I and my employer have paid in since 2011. I think I should definitely take my 25% and stop my avcs before they waste any more of my money. A building society would have done better.
@@TheOmniscientOne you seriously need to check what funds you are invested in if your pension has lost since 2011. Many funds have at least doubled in value since then.
Very useful thank you! I have just today put my retirement form in for my DB pension and I am taking the maximum tax free lump sum. I am 60 and would have to live to 101 before losing out on that decision. Yes there is the slight worry that the return I can make on the lump sum will not keep pace with inflation. But the monthly pension is enough to live on regardless and the reduction in income tax by taking the lower pension is quite significant on a relatively low income. One thing you didn’t mention I think is that if you were unfortunate enough to be diagnosed with a life limiting illness you can blow the lump sum on having fun (or on care), whereas you could not get hold of it anymore if you have left it in the fund. I have no beneficiaries (other than charities) I should add, so no worries about leaving enough for someone else.
I am 60 in July and have a DB pension from a previous employer I worked for for 23 years that pays out at 60 and have this decision to make. Given that I will have to pay income tax and NI until 67 on my pension I'm not sure.
Sort of related to item #6, assuming you have enough other income to live on (and hopefully being able to minimize any tax payable on that income), would be taking out a big tax free lump sum to give immediately to you children (eg for a house deposit, if they need it NOW) in the hope that you live for another 7+ years so as to avoid IHT tax on it. ie doing it whilst still young enough to hopefully survive 7 more years Side question, if you have a younger wife (likely to live longer) and you make a gift from a JOINT bank account (with it undefined who made the gift), how does the 7 year rule work if one of you dies sooner ?
Hi, thanks for responding. I guess I'm asking if you want a sum of cash for a retirement treat say: Is it better to release the cash from the isas or from the pension free cash. or Is there a nuanced benefit from hanging on to the isas rather than the tax free cash? I can't make up my mind. Msybe theres no difference either way.
Excellent video Pete. I have another possible reason but may be missing something. Assuming you could die before 75 and leave about half your remaining pot (still including 25% tax free) to your beneficiaries (which they now access all tax free), would it make sense to take all the tax free amount as soon as possible putting it in isas in the same investments?. The entire amount grows at the same rate as before but you've now accessed all of the tax free portion earlier, increasing your income, whilst leaving only taxable income to your beneficiaries (same amount as before and again free of IHT)? Hope than makes sense.
It does, but tax free cash isn’t transferred to beneficiaries in the same way as you take the 25% tax free cash yourself. If you die before age 75, the whole pot can be taken tax-free. After age 75, the fund will pass to the beneficiaries, but they won’t be able to take tax free cash from it…
I'm 55 in May, have a fair bit in credit card/loan/overdraft debt. I wondered whether I should draw down from my pension, pay off those debts and with the increase in available funds, increase my pension contributions and pay more into my pension fund? Is that a dumb idea?
For me, it's simple, the robbing pension providers only give your spouse half of your yearly pension income when you pop your clogs. Take what you can, stash it away and if you go earlier than than them they can draw the cash out monthly to make up the shortfall....assuming you haven't spent it all by then.
I have to get financial advice in order to get my private pension even though I know I want to take full pot amount. Do you know how much this is am UK. The form that has to be sent back to Royal London has to be filled in by Financial Advisor with their accreditations and numbers on it.
@@paulkane6645 You can't do it anyway. When you take the tax free money from the dB scheme you have to sign saying it won't be reinvested in another pension scheme. Recycling.
@@paulkane6645why? Usually DB schemes are capped at 5% max inflation. If you look at the stock marked over 120 years it (on average) always rises 3 to 5% above inflation. Yes there are ups and downs but you can segregate the investments to mitigate you having to draw down from a depleted fund. In short I'd rather earn a stock market average as opposed to a max (capped) 5% or less depending on inflation.
@@MeaningfulMoney thanks for the reply, I am 65 and still working so I don’t need to cash in, but if I was to take the lump sum whilst continuing to work it would put my earnings up for that year, does that mean I would pay 40% tax on the higher income, am I way off piste here, I think I need to get some financial advice on what to do
How about UFPLS ? If you don't need an immediate lump sum, you can spread your 25% tax free allowance over a number of years, boosting your income and retaining the option of taking a larger tax free lump sum at a later date, as your pension is not crystallised only the withdrawal.
Buying an annuity with a transfer from a a DB scheme may be beneficial for single people. Even if people marry later, DB pensions will only pay a widow(er) pension if married at the time of retirement. (Which is fair enough as it stops an old git (me?) marrying a 21 year ill on my death bed).
If you have a pension and isa savings could you just before you retire put £20000 from an isa in to a pension and get 20 percent from the government . Then take your tax free amount from your pension and put it back in an isa in the next tax year . Or double that if 2 of you 🤔
You need to work for the public sector. Teaching, Police, Firefighters, nursing, doctors, civil servants - all these get a Defined Benefit pension, though these days it’s not final salary in the strict sense of the word. Rather they are Career Average schemes.
@@MeaningfulMoney Thank you i would like to email direct I don’t know if u can give ur email address on here. Thank you for taking the time to answer Best wishes Jack
Hi Pete, im going to be 55 soon and i have a total of 7 pensions from various employments. I have one DC I moved to a private SIPP as it was only a money purchase scheme anyway. Its now worth £45k and i was wondering if i could take the 25% tax free out of that (not triggering any tax liabilities) and would I still be allowed to continue paying onto my current employer's DC scheme? Or would i have triggered the rule where I can only pay up to £10k into pensions? At the moment my and my employers combined monthly contribution to my DC is £1850 so I don't want to take some cash out of an old SIPP and scupper my current contributions. NOTE I'm aware things get complicated if I take more that 25% as that's a taxable withdrawal, so I do NOT intend to do that. Any advice greatly appreciated 👍
Main reason to take the cash straight away don’t trust politicians. These rules can and probably will change. Before Covid lots of options were being considered. Now the government is even more strapped for cash. Don’t assume that IHT rules, seen as the main attraction of leaving a pension untouched, are set in stone either.
If you move abroad can you get your DB scheme salary paid into a foreign bank account? I know there is a problem with doing this with the state pension. This may make up my mind in whether to take the tax free lump sum from my dB pension.
Would probably depend on the scheme but I always suggest that expats keep a UK bank account anyway. Not easy to open one when you’re overseas so very useful to keep. These days it’s so easy to move money around the world and into different currencies that you really can live anywhere.
@@MeaningfulMoney Thank you. I'll contact the scheme. I'm still pondering whether to take the full dB pension or the tax free lump sum and the reduced pension. I'll have to do more calculations.
Take the tax free lump sum as soon as it’s viable for your finances, you never know what tomorrow brings, particularly if the lump sum dies with you and goes to the state! 😁
DB is defined benefits…not so common these days, where you get a guaranteed income on retirement based on salary & length of service. DC is defined contributions…more common, where you / your employer contribute money to the pension. Some people (myself included) have both.
Hi Pete. For mid 5 figure pot. Your thoughts on moving all to a pension app? I stopped contributing as it was an old pension. I'm still actively working nearing 55...tia
The pension apps like PensionBee and others are a solid choice for anyone who doesn’t want to get involved with choosing investments. You can save money by choosing a platform and a decent multi-asset tracker fund, but if you don’t want to do that, the (smallish) extra cost of a done-for-you solution may be worth paying
Another reason worth a mention is if the individual plans to relocate outside the UK. To use a popular example, once you become a fiscal resident in Spain (over 183 days) you are taxed on your worldwide income and there is no such thing as a pension tax free amount in their calculations. Better to take you 25% in advance.
@@MeaningfulMoney I do , there's going to be a massive black hole in funds for pensions in future and the government will want to claw back as much as possible .
I think the key point is everyone’s circumstances are different enough to think through the options. For example a recently divorced individual with children over 25, who traded marital assets such as property to retain pension, might need tax free cash to buy a property at retirement. When monthly income reduction might make renting unattractive. It is important to take an interest in your personal financial assets and to make plans based on what you need first. Then see what options you have to finance things you would like.
Something else to consider now we have double digit inflation. Both my DB pensions state "Your pension earned on or after 6 April 2006 will be increased annually by the rise in the RPI subject to a maximum increase of 2.5% a year." They cut and pasted that from Government legislation. For some time that seemed like a good deal as the pensioners were getting bigger increases than us workers pay rises. Would the money be better off elsewhere these days ?
Very helpful. Great summary Pete and for illustrating why fortunately I have 0 reasons to take the tax-free lump sum. Each individual’s need is indeed unique.
Another excellent video. As a DB pensioner since last October, I looked at the commutation rate & took the "recommended" lump sum, some of which was put by for a "rainy-day" fund, the rest invested. I also had a widows' contribution refund - an unexpected and welcome few grand.
Excellent video. Point 5 was really helpful. I took my DB pension and now paying into a DC pension. Always worried I am going to end up paying too much tax. Point 5 helped me understand my position a lot better. Thanks Pete.
Great video. If you DON’T take the 25% lump sum tax free cash at the beginning, is 25% of each future drawdown tax-free? So, for example, if each year you took out £17,000 drawdown from your pension, then is the first 25% of that (£4,250) tax free. And as the remaining amount would be £12,570, then you wouldn’t pay tax on that amount either as that is your personal tax allowance amount (assuming you have no other income sources, and assuming for now that personal allowance amount would be the same in the future).
Basically yes - what you’re talking about here is UFPLS. Whenever you crystallise part or all of your fund - that’s when you get the choice to take cash. What you can’t do is crystallise the whole lot and then in future take tax-free cash. This video may help: ruclips.net/video/NOIivz8_QuA/видео.html
Yes for a DC pension but for DB you would have to check the scheme rules. For my DB pension I can take anything between 0% to 25% tax free lump sum but only at the start. If I don’t take it, there is no further flexibility and so no further option of tax free cash. In that respect, DC is a lot more flexible.
Pete, I have a decent DB projected pension, and also have a SIPP that I may let grow as long as possible … my lump sum will include an automatic sum, plus an AVC lump option, and optional additional 12:1 commutation to make up remaining 25% lump sum. Question: any advantage in taking max 25% to top up ISAs (mine and wife) and put remaining amount in SIPP? My thinking is that SIPP fund could transfer tax free to wife/children upon death. I guess there is no more tax free withdrawal from SIPP.
Remember your max contribution to a SIPP is the lower of £40K or 100% relevant earnings so you’ll need to be working or have worked in the tax year and have earned what you intend to put into your SIPP. Watch out for the lump sum recycling rules too.
Hi Pete, thanks you once more for covering this topic from a different perspective, your figures were very close to what I have and I found the video very helpful and informative. As you said there is no one fix for all as everybody has different types of pensions and different needs when they do retire, it is such a complex subject with life defining consequences. But thanks to your video's, insight & knowledge you make things a little easier to understand.
Enjoyed this video! Would it be possible to do a video on preparing your retirement finances from early(ish) in your career? I'm in my early 30s and would find that very useful to know what I should be thinking about. Thanks!
Noted, Matt. But try not to over think this stuff. In your early 30s, and subject to your other priorities, you should just be socking away as much as possible into pensions and ISAs, and investing aggressively
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Hope you've enjoyed this video - let me know in the comments. And if you are wondering why you might NOT want to take your pension tax-free cash, consider my previous video:
🔴 ruclips.net/video/RvtFdEOZLnc/видео.html - 5 Reasons NOT To Take Your Pension TAX-FREE CASH
Great video exemplifying the complexities. This is one of the most uncertain decisions regarding estate planning in my view.
Hi Pete, I have a pension that has been frozen for 22 yrs, its up to around 53 thousand I've been advised I can take 25% tax free the other 75% would be taxed does that sound right ??
Hi Pete, very interesting but now of course the LTA is unlimited so is it worth taking the full amount before the socialists get back in and reverse the LTA change? If you take it now and invest it surely that makes more sense?
Increasing tax rates are the reason I rolled over my 401k to a Roth. I don’t want to be 59 paying taxes on current income on withdrawals made from my retirement account.
Effective personal finance management matters more than the income source, whether from a job or investments. A certified financial advisor can offer tailored guidance to reduce expenses and boost income, optimizing your financial situation.
I completely agree; I have approximately $650k in external retirement funds. I am debt free and have very little money in retirement funds compared to the total value of my portfolio over the past three years. To be honest, the Fin-advisor can only be neglected, not rejected. Just do your due diligence to identify a fiduciary one.
This is exactly how i wish to get my finances coordinated ahead or retirement. Can I get access to your advisor?
Sonya Lee Mitchell is the manager I use. Just research the name. You'd find necessary details to set up an appointment.
I looked her up, and I have sent her an email. I hope she gets back to me soon. Thank you
I'm tempted to take the tax free lump sum in case a future government takes this option away in future
Same here. grab it while you can
Rachel Reeves says hi wealthy pension pot people, see you soon!
Not going to work for everyone but my plan it to take the tax free when I hit 55.
If I don't mess up how I use/invest the money ;) the reasons are
1) Puts me in a position to reduce my mortgage, significantly, and potentially paying it off a lot earlier.
1.1) The money I save from clearing the mortgage is, potentially, more than the return I can expect between 55-67 on the pension so I may actually be slightly better off taking it.
2) Allows us to get ready for retirement (house upgrades, etc.) without leaving them all until I'm retired.
3) Can actually live now, instead of getting by, until retirement.
In terms of actual retirement I should still be comfortable from my projected pension, and arguably fall in to "well off".
I've just retired at 55.
I took the tax free lump sum for one reason.
I'm single and bought and paid off my home. I paid everything myself but in doing so I basically lived month to month and never had any savings at all.
I took the lump sum as I finally have something to fall back on.
I was waiting for the "Bought myself a sports car" ;-)
@@fuzzblightyear145 I Have two convertible two seaters.
When we were dealing with an estate we found that the maximum tax free lump sum had been taken, so reducing the pension in payment. However, the survivor benefits/widow's pension were based on the original sum , which was nice surprise. So sometimes taking more cash isn't a bad thing for survivors depending on the scheme.
Retire time guys spend your money while you have your health, no good having a higher monthly payment if you cannot get out the house
The one intangible in all this - how long will you live and how long will you live with good health to enjoy the fruits of your labour ?
Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got to talking about investment and money. I started investing with $150k and in the first 2 months, my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and get more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.
Hi. I’ve been forced to find additional sources of income as I got retrenched. I barely have time to continue trading and watch my investments since I had my second child. Do you think I should take a break for a while from the market and focus on other things or return whenever I have free time or is it a continuous process? Thanks
@@Donnafrank-k6e However, if you do not have access to a professional like Clementina Abate Russo, quitting your job to focus on trading may not be the best approach. It is important to consider all options and seek guidance from reliable sources before making any major decisions. Consulting with an AI or using automated trading systems can also be helpful in managing investments while balancing other commitments.
@@lennoxmutterick6434 Oh please I’d love that. Thanks!.
@@Donnafrank-k6e Clementina Abate Russo is her name.
Lookup with her name on the webpage.
Take the money! You may not need all 25% but I believe we will be the last few allowed to get 25% tax free on entire pot. Government will introduce threshold (heard 400k pot) that will allow you just 100k tax free.
This was really helpful and as clear as this complex subject can be! Something that you didn't mention specifically is life expectancy - if your health is such that you don't expect to live long in retirement then taking the maximum tax free money up front may also make sense.
This is exactly why I intend to take the max lump sum at around 57yrs old, both myself and wife have health issues and are on medications that knock at least 10yrs off our lifespans so it seems silly not to, we can still use some in a higher interest account to boost our income a bit....
I am 3 years away from taking the UK state pension with a potential combined pension pot around the national average of 64K. Making the right decision is very tricky & this all sounds very complicated to me.
It is, but on those figures your decisions are likely to be:
- tax-free cash or not?
- guaranteed income (annuity) or more flexibility (drawdown)
@@MeaningfulMoney Thanks for the reply.
Hi Pete,thanks for the video,it helps I think.I’ve been grappling with my pru pension for months,probably two years, we moved to Australia thirteen years ago and about three years ago got a letter saying they were freezing the pension because we had lived outside the country for over x amount of years.I have ten years left and think it would be better to put it in a SMSF , (supa pension fund) and try to grow it as its just sits there in the uk ,any thoughts would be helpful thanks
I think one really good reason to take all of your tax free amount (your own personal max amount) is because it's done, you can drip feed it into ISAs etc. And once it's done labour can't reduce the amount you can take as you have already taken it. you can still draw down your non tax free cash up to the £12500 tax free income level and use some of the invested cash tax free withdrawal you made and, in effect, pay no tax on either amount.
Just ordered your book The Meaningful Money Handbook Looking forward to reading it.
6:40 Ref reason #5. It is not logical to advise taking a lump sum simply to mitigate Tax within a DB pension. The DB fund is inexhaustible so why be concerned about how much is taken on tax? Focus should be on getting the most net pay irrespective of taxation. Lets face it, DB pension money is unlike a normal salary. It is not money that has been hard earned through work, it does not diminish, so who cares how much tax is taken?
Good one Pete
What if a future government were to cap or even cancel ISA wrappers
Pete these are so helpful! Thank you! Do you have specific resources for British expats with private uk pensionpots?
I have a West Midlands Pension Fund pension, paid in for 237 years and retired a month ago at 55. Im still deciding on the 2 options they have given me - 15000 lump sum and 8.500 annuity, or 45000 lump sum and 6.500 annuity. I have to have the annuity which at least is guaranteed income. Is the annuity taxed? I have no kids, no mortgage. I look after my dad who is 90 now so wanted to spend time with him. Shall i take the higher lump sum and invest half in a fixed ISA for 5 years, and the other half in a savings account with limited access, and just keeping some back for paying off credit card and other smaller debts. I need to complete the form but still trying to understand all this, but have no spare money so need to sort it out soon.
As I understand once you take your lump sum, you are then obliged to start taking from your pension as taxable income from that point onwards.
Can you take the 25% tax free in several withdrawals over a period of time? For example if I withdrew 5% per year would this always be tax free?
Just recived some tax free cash this morning I am effected by S24 and the tax free income dosent make me worse off I am staying fully invested and just takeing what I need per month I also own a company so my company will be paying more cash into my SIPP Pensions are great and you dont really know how good they are untill some cash comes into your account month after month
Thanks for the advice and I get all the pros for leaving the tax free lump where it does the most good growth wise but with so much political wavering over pensioners and their pensions I worry that at some point our next government (labour most likely) might withdraw the 25% tax free option. Do you have any views on this prospect?
I’ve been an adviser for 26 years and this has been mooted before every budget and every change of government. Yes, it might happen, but I’ll always counsel caution in making big decisions based on what *might* happen.
With a defined benefit pension, when you draw the pension it is treated as normal income. So not taking the tax free lump sum will result in the whole amount being taxed. e.g. Total pension = £20,000 you are taxed on the whole amount, reduced pension £15,000 + £90,000 tax free lump sum. You will only pay tax on the £15,000. Surely this makes it obvious to take the lump sum from a defined benefit pension.
I’d say that’s a good reason to take the tax-free cash, yes. But there are reasons not to, as well… I’d always be wary of letting the tax tail was the dog, so to speak…
@@MeaningfulMoney what are the reasons?
Absolutely right that everyone needs to analyse their own situation. One small point you missed is utilising the 7 year period for PET to reduce IHT; for the few who are very well provided for this can help ( as can giving from spare income- an efficient form of IHT reduction for the fortunate )
Great advice, thank you! Say I have a DC pension with a pot of £500k and want to pay zero tax going forward at the point of retirement. My current plan is to take £125k tax free and then draw £12,500 pa from the remaining pot of £375k. I will then split the £125k over 10 years to get me to state pension age, giving my an annual income of £25k for those 10 years. Is there a more effective way to take out funds that gives me £25k pa after tax? Can I state that I want to take the £125k tax free amount over the 10 years at £12,500 pa therefore leaving it to continue growing, or does it get converted to cash at the start of withdrawal process?
You’d need to take the cash, bank it and draw off it for ten years. The only way you can have £125k tax-free is if you crystallise the whole pot in one go. It may make more sense to crystallise in chunks. But what you suggest is probably the only way to have £25k per year tax-free.
@@MeaningfulMoney thank you!
I am 61 and wish to take early retirement. I have worked at the same higher education institution all my life, and been paying into the LPF since 1980. Do I have any protection regarding what was Rule 85, which existed until 2006?
Thanks for you excellent videos. If you don't need the cash in a DC pension (I'm 64), but want to take the 25% because of the upcoming budget, would it make sense to invest in short term low coupon gilts, which yield 3.5%+ tax free? This seems a safe way to grow the drawdown amount at a reasonable level without incurring tax bill.
Take it before the torys do!
Or, take it before Labour make your pension valueless. Again!
@@grahamthomas6381it would seem never a truer word was said!
I have a Railway pension, but the current pension provider has changed & a large chunk of my pension (£12,000), seems to have disappeared, what’s going on??
Pensions are invested. Whatever your pension is invested in clearly went down in value.
Thanks. A question on number 2. If you took tax free cash out of your db pension to buy an annuity, at some point does the returns on that annuity qualify or come into paying tax equations?
One of my pensions is in a PPF scheme. I'm struggling to see why my 25% tax free is more like 20%. Also i can no longer see my total amount in the scheme. I'm 55 this year and really need to get my house in order.
you should be able to use all unused isa years
Is it possible to take the tax free sum at 55 (lets say to pay off mortgage) but continue to work in your full time job? Thanks!
Any advice for self employed?
The problem with taking cash is in a few years it's gone and forgotten.
But leaving it in your pension in 10 or 20 years you will still be getting that extra pension and the yearly increase is more .
Not if I pay my mortgage off. I will be immediately £400 a month better off for the next 13 years. Assuming the property value will grow and of course a pension pot is not the only place to invest your extra money. As soon as the kids leave home we will downsize and move to an EU country where the cost of living is cheaper.
Another consideration is where there is a spouse or partner who has unused allowances that you could make work for you as a pair. For example you could take tax free cash of £7,499 and pay it into the pension of your spouse or partner who perhaps could usefully have a larger pension pot. At this level you would avoid the pension lump sum recycling rules and with better advice and planning perhaps even put in more than £7,500. You might also want to use their unused ISA allowance. I am thinking mainly about circumstances where one partner has a large pension and possibly other taxable income, maybe pushing them into higher rates of tax and the other partner has much less income enabling a transfer of income from one to the other at a lower or even nil rate. When I say income I mean projected future income as well as the here and now.
Why do you think pensions are so great?
I just checked my work pension and for the period Dec 2021 to May 2022, the fund actually lost MORE money than was paid in my myself and my employer - we both pay in 6%. The fund is actually worth over £500 less now, than it was in Dec 2021 ergo, everything paid in for that period has gone too.
So what you're saying is that it is now cheaper for you to invest in your pension: stocks and shares are on sale. This is a good thing whilst you are still saving.
Everything you pay into your pension is tax free: so that £500 only cost you about £250.
The only downside to a pension is that you can't touch it until you are 55 (currently, the law might change). A semi-downside is that once you draw even a penny from your pension the amount you can pay in collapses from £40K a year to a miserly £4K a year.
Here’s the reply I added to your similar comment on the other video, Chris:
People don’t trust pensions because they don’t understand them.
Every time money has gone in since December, you’ve been buying shares or whatever at lower and lower prices, meaning you’re buying more of them. When markets come around - and they ALWAYS do - you’ll see a marked increase in the value of your holding.
What you’re doing is exactly the right strategy - keep buying regularly, and some of it with money that isn’t even yours! Depending on how old you are, this may be your first serious market correction. There will be many more in future - keep investing and your future self will thank you.
My Scottish Widows work pension is worth £65k less than what I and my employer have paid in since 2011. I think I should definitely take my 25% and stop my avcs before they waste any more of my money. A building society would have done better.
@@MeaningfulMoney now that made sense. thank you.
@@TheOmniscientOne you seriously need to check what funds you are invested in if your pension has lost since 2011. Many funds have at least doubled in value since then.
Reason 7. - one word - Porsche. and yes that is a serious answer.
I am with you there!
A fool and their money are soon parted
@@ZeldaFitznah, a Porsche retains value, buy one for 100k, sell it for 80k
@@ZeldaFitz His life, his choice
Very useful thank you! I have just today put my retirement form in for my DB pension and I am taking the maximum tax free lump sum. I am 60 and would have to live to 101 before losing out on that decision. Yes there is the slight worry that the return I can make on the lump sum will not keep pace with inflation. But the monthly pension is enough to live on regardless and the reduction in income tax by taking the lower pension is quite significant on a relatively low income. One thing you didn’t mention I think is that if you were unfortunate enough to be diagnosed with a life limiting illness you can blow the lump sum on having fun (or on care), whereas you could not get hold of it anymore if you have left it in the fund. I have no beneficiaries (other than charities) I should add, so no worries about leaving enough for someone else.
Thank you for your example.
I did exactly the same Petra as I thought that was the best option.
I am 60 in July and have a DB pension from a previous employer I worked for for 23 years that pays out at 60 and have this decision to make. Given that I will have to pay income tax and NI until 67 on my pension I'm not sure.
What difference % growth would it make to turn off my life styling on my pension at 60yrs old on an 100k pension?
Can you keep your DC pension pot as is after drawdown of 1/4 of the pot?
Yes. It’ll become a drawdown pot, but it can stay invested and you don’t have to draw from it…
What are your thoughts on Bridging Pension from a DB scheme?
Can you please tell me if I have to take my pension lump sum at the age of 60 with my post office pension and can differ my pension
Sort of related to item #6, assuming you have enough other income to live on (and hopefully being able to minimize any tax payable on that income), would be taking out a big tax free lump sum to give immediately to you children (eg for a house deposit, if they need it NOW) in the hope that you live for another 7+ years so as to avoid IHT tax on it. ie doing it whilst still young enough to hopefully survive 7 more years
Side question, if you have a younger wife (likely to live longer) and you make a gift from a JOINT bank account (with it undefined who made the gift), how does the 7 year rule work if one of you dies sooner ?
If you had the choice of cashing in income paying ISAs or taking the 25‰ tax free pension cash, given its the same amount, which one makes more sense?
Not sure I can answer that. Why would you cash in an income-paying investment?
Hi, thanks for responding.
I guess I'm asking if you want a sum of cash for a retirement treat say: Is it better to release the cash from the isas or from the pension free cash.
or
Is there a nuanced benefit from hanging on to the isas rather than the tax free cash?
I can't make up my mind. Msybe theres no difference either way.
Excellent video Pete. I have another possible reason but may be missing something. Assuming you could die before 75 and leave about half your remaining pot (still including 25% tax free) to your beneficiaries (which they now access all tax free), would it make sense to take all the tax free amount as soon as possible putting it in isas in the same investments?. The entire amount grows at the same rate as before but you've now accessed all of the tax free portion earlier, increasing your income, whilst leaving only taxable income to your beneficiaries (same amount as before and again free of IHT)? Hope than makes sense.
It does, but tax free cash isn’t transferred to beneficiaries in the same way as you take the 25% tax free cash yourself. If you die before age 75, the whole pot can be taken tax-free. After age 75, the fund will pass to the beneficiaries, but they won’t be able to take tax free cash from it…
@@MeaningfulMoney Thanks Pete. I'll read up on this a bit more.
I'm 55 in May, have a fair bit in credit card/loan/overdraft debt. I wondered whether I should draw down from my pension, pay off those debts and with the increase in available funds, increase my pension contributions and pay more into my pension fund? Is that a dumb idea?
It’s not a bad idea, but I can’t advise you here, unfortunately. Seek help if you’re unsure…
What about using some of your tax free lump sum to invest in precious metals?
Risky strategy, depending on how much you’re talking
For me, it's simple, the robbing pension providers only give your spouse half of your yearly pension income when you pop your clogs. Take what you can, stash it away and if you go earlier than than them they can draw the cash out monthly to make up the shortfall....assuming you haven't spent it all by then.
I have to get financial advice in order to get my private pension even though I know I want to take full pot amount. Do you know how much this is am UK. The form that has to be sent back to Royal London has to be filled in by Financial Advisor with their accreditations and numbers on it.
Assuming the sums add up, can I take my DB pension at 55 and invest the tax free lump sum in my DC scheme with a view to retiring later?
Doesn't that count as recycling?
I don't think the sums would add up. Keeping the money invested in the DB scheme will generally outperform a DC scheme.
@@paulkane6645 You can't do it anyway. When you take the tax free money from the dB scheme you have to sign saying it won't be reinvested in another pension scheme. Recycling.
@@paulkane6645why? Usually DB schemes are capped at 5% max inflation. If you look at the stock marked over 120 years it (on average) always rises 3 to 5% above inflation. Yes there are ups and downs but you can segregate the investments to mitigate you having to draw down from a depleted fund. In short I'd rather earn a stock market average as opposed to a max (capped) 5% or less depending on inflation.
Wow, I did not realise pensions were so complicated
It’s why I have a job, Gary!
@@MeaningfulMoney thanks for the reply, I am 65 and still working so I don’t need to cash in, but if I was to take the lump sum whilst continuing to work it would put my earnings up for that year, does that mean I would pay 40% tax on the higher income, am I way off piste here, I think I need to get some financial advice on what to do
I think the lump sum remains tax-free, and isn't taxable income. Although, as you said, you'd should get proper advice.
So I just talked to a company who told me there is only annuity or drawdown and they've never heard of UFPLS
Terrifying. Presume it was UK? Was it an advice firm or a pension company?
Hi @meaningfulmoney are pension schemes worth it for part time workers as well? I’d really appreciate your advice on this. Thank you!
Always, yes. The tax benefits are considerable.
How about UFPLS ? If you don't need an immediate lump sum, you can spread your 25% tax free allowance over a number of years, boosting your income and retaining the option of taking a larger tax free lump sum at a later date, as your pension is not crystallised only the withdrawal.
Agreed. Done lots of other videos on that subject, not least this one: ruclips.net/video/NOIivz8_QuA/видео.html
Get your currency out of the ponzy scheme asap
If you have 3 personal pensions, do you get 25% tax free from each pension? Or only from 1 pension?
Across all your pensions. So if they stay as three separate pots, you’ll get 25% from each one.
I want to take my pension tax free. The whole lot. Is there any way to do this. I'm talking about the whole pension pot.
Nope. At least not in the UK
@@MeaningfulMoney what if I go to another country and take it there.
I don't even mind drawing down my scone pension
Buying an annuity with a transfer from a a DB scheme may be beneficial for single people. Even if people marry later, DB pensions will only pay a widow(er) pension if married at the time of retirement. (Which is fair enough as it stops an old git (me?) marrying a 21 year ill on my death bed).
U sure ….. u can marry at anytime and it’s part of your estate and legal
If you have a pension and isa savings could you just before you retire put £20000 from an isa in to a pension and get 20 percent from the government . Then take your tax free amount from your pension and put it back in an isa in the next tax year . Or double that if 2 of you 🤔
Yep, definitely!
Hello how do I get a final salary pension please
Thank you
Jack
You need to work for the public sector. Teaching, Police, Firefighters, nursing, doctors, civil servants - all these get a Defined Benefit pension, though these days it’s not final salary in the strict sense of the word. Rather they are Career Average schemes.
@@MeaningfulMoney
Thank you i would like to email direct I don’t know if u can give ur email address on here.
Thank you for taking the time to answer
Best wishes
Jack
Hi Pete, im going to be 55 soon and i have a total of 7 pensions from various employments. I have one DC I moved to a private SIPP as it was only a money purchase scheme anyway. Its now worth £45k and i was wondering if i could take the 25% tax free out of that (not triggering any tax liabilities) and would I still be allowed to continue paying onto my current employer's DC scheme? Or would i have triggered the rule where I can only pay up to £10k into pensions? At the moment my and my employers combined monthly contribution to my DC is £1850 so I don't want to take some cash out of an old SIPP and scupper my current contributions. NOTE I'm aware things get complicated if I take more that 25% as that's a taxable withdrawal, so I do NOT intend to do that. Any advice greatly appreciated 👍
Hi Andrew. If you only take tax-free cash, then you will not trigger the Money Purchase Annual Allowance (max £10k contribution) so you should be fine
@@MeaningfulMoney brilliant, thanks Pete!
So… It’s not a good idea to pay off a mortgage using tax free cash? I thought it would be a good thing to do - an investment in property.
Great tips and useful concepts
Thanks!
Thank YOU, Nancy! 🙏🏻
Rachel Reeves says hi, thanks for the lump sum, see you all in two weeks time.
Main reason to take the cash straight away don’t trust politicians. These rules can and probably will change. Before Covid lots of options were being considered. Now the government is even more strapped for cash. Don’t assume that IHT rules, seen as the main attraction of leaving a pension untouched, are set in stone either.
If you move abroad can you get your DB scheme salary paid into a foreign bank account? I know there is a problem with doing this with the state pension. This may make up my mind in whether to take the tax free lump sum from my dB pension.
Would probably depend on the scheme but I always suggest that expats keep a UK bank account anyway. Not easy to open one when you’re overseas so very useful to keep. These days it’s so easy to move money around the world and into different currencies that you really can live anywhere.
@@MeaningfulMoney Thank you. I'll contact the scheme. I'm still pondering whether to take the full dB pension or the tax free lump sum and the reduced pension. I'll have to do more calculations.
Take the tax free lump sum as soon as it’s viable for your finances, you never know what tomorrow brings, particularly if the lump sum dies with you and goes to the state! 😁
It doesn’t go to the state at all. See here: ruclips.net/video/jEbYkc1EwZc/видео.htmlsi=M8t-AZMUnreJqELB
@@MeaningfulMoney Yes of course not the state, ( tongue in cheek remark!) - smiley face was a step for a hint your audience aren’t daft. 😊
Missed a lot of that because I haven’t a clue what “DB” and “DC” mean 🤷🏻♂️
DB is defined benefits…not so common these days, where you get a guaranteed income on retirement based on salary & length of service. DC is defined contributions…more common, where you / your employer contribute money to the pension. Some people (myself included) have both.
is it easy to take it?
Hi Pete. For mid 5 figure pot. Your thoughts on moving all to a pension app? I stopped contributing as it was an old pension. I'm still actively working nearing 55...tia
The pension apps like PensionBee and others are a solid choice for anyone who doesn’t want to get involved with choosing investments. You can save money by choosing a platform and a decent multi-asset tracker fund, but if you don’t want to do that, the (smallish) extra cost of a done-for-you solution may be worth paying
@@MeaningfulMoney thanks mate. Now just deciding which one lol. Moneybox or pensionbee...great informative videos subscribed!
at what point is a pension tax free? In the US a pension distribution is taxed as income.
This is a UK channel, Nixon. 25% of your accumulated pension fund can be drawn tax-free here.
@@MeaningfulMoney Lucky. Maybe I should consider moving to the UK.
Only take the 25
How do I take cash free cash living in Australia?
By moving to the uk 🇬🇧
Another reason worth a mention is if the individual plans to relocate outside the UK. To use a popular example, once you become a fiscal resident in Spain (over 183 days) you are taxed on your worldwide income and there is no such thing as a pension tax free amount in their calculations. Better to take you 25% in advance.
Do you think in the near future that government will stop the 25% tax free allowance?
It’s been rumoured for as long as I’ve been working, over 20 years. They’ve already called it with the LTA, but I don’t see them abolishing it, no.
@@MeaningfulMoney I do , there's going to be a massive black hole in funds for pensions in future and the government will want to claw back as much as possible .
I think the key point is everyone’s circumstances are different enough to think through the options. For example a recently divorced individual with children over 25, who traded marital assets such as property to retain pension, might need tax free cash to buy a property at retirement. When monthly income reduction might make renting unattractive.
It is important to take an interest in your personal financial assets and to make plans based on what you need first. Then see what options you have to finance things you would like.
Couldn’t agree more, Andrew!
Good points raised in your comments
Something else to consider now we have double digit inflation. Both my DB pensions state
"Your pension earned on or after 6 April 2006 will be increased annually by the rise in the RPI subject to a maximum increase of 2.5% a year."
They cut and pasted that from Government legislation. For some time that seemed like a good deal as the pensioners were getting bigger increases than us workers pay rises. Would the money be better off elsewhere these days ?
you forgot to mention the difference between a DB and DC pension.
Yes, I imagine you’re right. I’ve mentioned it lots in other videos, but I do try to make sure it’s covered off every time. Just missed it this time…
I really appreciate your videos. Thank you.
And I appreciate you, Christine - thanks for being here!
Taxation is protection, protected from counterfeit, laundering, and exercise of scrupulous schemes. Protection from abusers. SMEs... 2022 onwards.
Profound
Well
Well indeed.
Very helpful. Great summary Pete and for illustrating why fortunately I have 0 reasons to take the tax-free lump sum. Each individual’s need is indeed unique.
It’s true, Craig. I’m delighted the video was helpful - thanks for watching!
Thanks for the quick 2nd video. Always like to hear both sides of the argument.
Me too, Ivor - thanks for watching!
I took out some cash from my pension pot,. I was taxed on it and had to pay vat on it as well...Be careful..be well always..:-)
This is brilliant! Thank you.
Glad it was helpful, thanks for watching!
Another excellent video. As a DB pensioner since last October, I looked at the commutation rate & took the "recommended" lump sum, some of which was put by for a "rainy-day" fund, the rest invested. I also had a widows' contribution refund - an unexpected and welcome few grand.
Nice, Tony - I didn't even know a widows' contribution refund was a thing!
@@MeaningfulMoney It's only if you're single, Pete!
Excellent video. Point 5 was really helpful. I took my DB pension and now paying into a DC pension. Always worried I am going to end up paying too much tax. Point 5 helped me understand my position a lot better. Thanks Pete.
Cheers Mo - glad it was helpful!
very helpful except my pension provider told me only 25% of the 25%was tax free so had to take more out to allow for tax cost me a lot of money
Great video. If you DON’T take the 25% lump sum tax free cash at the beginning, is 25% of each future drawdown tax-free? So, for example, if each year you took out £17,000 drawdown from your pension, then is the first 25% of that (£4,250) tax free. And as the remaining amount would be £12,570, then you wouldn’t pay tax on that amount either as that is your personal tax allowance amount (assuming you have no other income sources, and assuming for now that personal allowance amount would be the same in the future).
Basically yes - what you’re talking about here is UFPLS. Whenever you crystallise part or all of your fund - that’s when you get the choice to take cash. What you can’t do is crystallise the whole lot and then in future take tax-free cash. This video may help: ruclips.net/video/NOIivz8_QuA/видео.html
@@MeaningfulMoney Great, thank you!
Yes for a DC pension but for DB you would have to check the scheme rules. For my DB pension I can take anything between 0% to 25% tax free lump sum but only at the start. If I don’t take it, there is no further flexibility and so no further option of tax free cash. In that respect, DC is a lot more flexible.
Awesome stuff
Cheers, Sean 👍🏻🙏🏻
Pete, I have a decent DB projected pension, and also have a SIPP that I may let grow as long as possible … my lump sum will include an automatic sum, plus an AVC lump option, and optional additional 12:1 commutation to make up remaining 25% lump sum. Question: any advantage in taking max 25% to top up ISAs (mine and wife) and put remaining amount in SIPP? My thinking is that SIPP fund could transfer tax free to wife/children upon death. I guess there is no more tax free withdrawal from SIPP.
Pension planning like this is something I would seriously consider paying a pension financial advisor to talk about. The details can be important.
Remember your max contribution to a SIPP is the lower of £40K or 100% relevant earnings so you’ll need to be working or have worked in the tax year and have earned what you intend to put into your SIPP. Watch out for the lump sum recycling rules too.
Take it now,it might get taxed under labour
Many thanks for both videos.
You’re welcome, Jonathan!
Very glad you started with the most straightforward reason of all: I need the money!!
It's obvious, right?! Glad the video was helpful...
Hi Pete, thanks you once more for covering this topic from a different perspective, your figures were very close to what I have and I found the video very helpful and informative. As you said there is no one fix for all as everybody has different types of pensions and different needs when they do retire, it is such a complex subject with life defining consequences. But thanks to your video's, insight & knowledge you make things a little easier to understand.
I’m delighted it was helpful, Jackie - thanks for watching and for the encouragement 🙏🏻
Another excellent vid cheers. Has helped reinforce that I'm making the right choices re reducing tax liabilities.
I’m glad it was helpful, Chris 👊🏻👍🏻
Enjoyed this video! Would it be possible to do a video on preparing your retirement finances from early(ish) in your career? I'm in my early 30s and would find that very useful to know what I should be thinking about. Thanks!
Noted, Matt. But try not to over think this stuff. In your early 30s, and subject to your other priorities, you should just be socking away as much as possible into pensions and ISAs, and investing aggressively
Great to see someone at your age taking your finances seriously, well done
@@UK-Property-Tax-Accountants Thanks, appreciate that!