The Month You Retire Really Matters
HTML-код
- Опубликовано: 21 окт 2024
- Looking for help with Financial Planning?
I am a Chartered Wealth Manager and Partner in a financial planning practice based in the UK. If you would like to find out more about working with us, please follow this link: go.novawm.com/...
Sign up to my Newsletter to receive my synopsis of the Autumn Budget on the day
james-shack.co...
Risk Warnings
Capital at risk. Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change. We do not provide tax advice. Any examples used in the video are for illustrative purposes only and you may get less back than the figures shown. This video does not constitute personal advice. We do not take any responsibility for third party websites and content we may link to from this video.
Issued on behalf of Nova. Nova is a trading name of Nova Wealth Ltd, which is authorised and regulated by the Financial Conduct Authority (FRN: 778951) and is a limited company registered in England & Wales (10739796).
James Shack™ property of James Shackell
Copyright © James Shackell 2024. All rights reserved.
The author asserts their moral right under the Copyright, Designs and Patents Act 1988 to be identified as the author of this channel and any video published on it.
![Gunna - HIM ALL ALONG [Official Visualizer]](http://i.ytimg.com/vi/HiCxoDeo0hc/mqdefault.jpg)
![The BIG Financial Risk That Everyone is Underestimating [Must Watch]](/img/1.gif)
Another great video James. You’re r spot on - I retired in November because I just had enough, the nights drew in and the winter was just miserable- I couldn’t do most of the things I was planning to do because of the weather. I also couldn’t go on a holiday as my Wife was still working.
My advice - Retire at the end of March and look forward to the spring and summer.
By retiring at the end of March you will have missed most of the ski season, which is what I’m planning to do much more of in my retirement, it is always possible to go away without your wife? My wife & son are currently in Poland visiting her family, I’ve been with them twice this year already & they went to The Seychelles without me back in June. We do still do holidays together, it’s just being flexible.
Each to their own . Retire when you’ve had enough of it.
I'm someone who retired end of November, but I had a motivation. It gave me the opportunity to do that season of skiing that I'd never been able to do. Any retirement trepidations were forgotten in the excitement of the holiday anticipation. And on returning I had been out of my work routine for long enough to simply not notice I was retired! So I completely agree with your suggestion for winter retiring James.
Insights you just don't get from other finance youtubers...
Thank you James - great video.
I love how, yes of course you look at the financial facts and figures, but also really cover the human aspects as well. It is so easy to overlook.
Great point about retiring in spring vs winter!
I waited for my promised bonus and when they gave me less than 1/3 of what they had promised, I handed my notice in. That was in May 2022 and I haven’t looked back since. Rather than go on holiday, I relocated to the uk and started house hunting, and when I eventually found a house I had it renovated, so I had my mind focussed for well over a year… I didn’t feel like I’d retired until February 2024, and I’ve made the most of the daylight hours (I struggle to use the word “Summer” in this country! 😂). You’re so right about preparing mentally. It’s so very important!
Great video as always. Thank you!
Better to get 1/3rd than none at all. I just commented elsewhere how many things get recalculated at the start of the new tax year.
Don't underestimate the mental impact of retiring as James you have mentioned. For me, I have effectively semi-retired making a step change. Having worked for 46 years full-time within financial services I have taken up as a sole trader / self - employed a completely different 'job' - actually it isn't a job for me as I love it and it's more like a hobby whilst providing some additional income on top of my pension - most importantly it gives me a sense of purpose. Never retire from something (work) but retire to something - your retirement intensions / plan in other words.....
I retired as soon as I turned 55yrs old, it felt like winning the lottery not working anymore, didn't matter to my about the timming, I just waited till the following April until I started to draw anything from my sipp, I just used other methods I put in place, but the main objective was stopping working, it was a lottery win
Same here. I retired last month.
Congratulations!
There's generally 4 public holidays in April and May, plus you generally accrue 2 days per month. Might be worth considering an easy last 2 months into a tax year and getting paid for it!
Good point 👍
What on earth will the difference 4 days off work will make when you’re about to retire 😂
Our career average pension gets recalculated at the end of the tax year. One week could make a 3.5% difference in your pension for the rest of your life.
@@caio5987 true though I find if you have plenty holiday mixed into working weeks then it flies. Plus depending on organisation holiday year can be a way to either carry forward some leave to take or have paid.
It could be possible to work only about 5 weeks over an 8 week period and start the next tax year with a little bit of income...
I watch your videos regularly and they have really helped me to prepare for early retirement. I am turning 60 in Feb next year but will need to work a few more years to be comfortable with my dc pension level and mortgage paid off. I particularly have enjoyed this video. Adding Pension contributions from ISAs was not something I had considered. I agree with March as best month to retire. Once again you have armed me with valuable information. Keep producing the content. Great site. ❤
Brilliant James easy to miss this important decision
I agree, March seems ideal. The thought of starting retirement as the days get short, dark and cold does not appeal. Longer, lighter Spring/Summer days is a far more positive time to start a new life chapter.
Noy exactly retiring but my 20 yr army service was due to end in a April. But that means paying 42% tax when i could stop earlier, avoid the higher tax and then see what life brings.
So 9 month career break (therefore adding 9 months to the 20 years) was amazing . Loved life, bought house and did DiY along with travelling the world to visit friends i haven't seen for 10 years.
Enjoy life now if you can . Ive returned to finish my 20 years and happy every day in work and positive about when this episode comes to an end
Great video James. I will definitely take this advice in a few years. Thanks
Top content James, comprehensive and thought provoking. You also make it seem like you are talking directly 1:1
Very timely. I've recently taken the decision to retire in March 2025 for all the reasons stated.
Me to but hope Budget doesn't scupper some of my plans in March.
Same I tried to retire in March 25 but my job said I can't retire at 38
All the best with it !
another banger great work!
I know of someone who was desperate to retire and retired in December. In six weeks he was back at work...
It does happen. That's why it's often best to test the waters first, perhaps by taking a long sabbatical or by reducing your hours at work.
One of my clients did this. They really enjoyed the challenge of work but decided to take a year off work 5 years before he was actually planning to retire.
When he returned to work after the year off, he quickly realised that his heart was no longer in it; so he quit and has never looked back.
Thanks James - another super useful video. You have become my go-to source of pension wisdom.
Great tip about the health check as I need to make the most of this private health perk.
I will be 61 next August. Original plan was to retire at 62, but I suspect that I will be gone before then.
I have two defined benefit plans that kick in at 65 with more than enough savings (ISAs, premium bonds, defined contribution pension) to take me to 65.
Currently maxing out on contributions.
England cricket tour of Australia in winter '25 is my 'bucket list' plan, but I would benefit by leaving in March due to tax.
My bonus is paid in June and I am ineligible if I leave before then.
Too many variables ! :( I've decided to sit tight & wait for the budget to see whether there are additional incentives.
The only thing that I have been considering that you have not mentioned was volunteering as soon as I retire, to fill that sense of purpose.
Great video, covers all of our experience. I retired in 2023, giving up work in Feb/March and starting to draw from pensions in April/May - much easier to manage with a fresh tax year, and bonus for DB pension: my birthday is in April. My Wife gave up work in November of the same year and struggled a bit through the winter (cold, wet, not much going outside etc). We're all good now, but your right, time of year does matter. I did miss out on my company bonus due to resigning before it was due, but £2-3k, well in my 30-year income forecast that's a bit trivial.
Another angle is if you are redundant-retired like me. I wanted to put a big wedge of my redundancy into my pension, and fortunately I got that sum in March so I had a full year of income to give me a high pension input limit. If I'd received it a month later I would have had a much lower pension input limit.
Wow! For once in my life I did something right. Retired March 31st 2013 aged 59 from an increasingly stressful NHS job. Lost out on my final salary increment, but I couldn’t have handled another year. Have now had 10 excellent retirement summers (I’m ignoring this year’s rubbish one). Pensions are ticking over but I’m braced for a raid from the current government and have plans in place. Thanks for the sage advice.
Absolutely echo everything that you said James! Sadly my partner is retiring in March due to ill health and not from choice. He's been diagnosed with cancer so next year for us is going to be very different from what we planned. Our 'big holiday' is on hold but hopefully 2026 we can make that trip! I'm not anywhere near retirement but really find your videos useful! Thank you!
Perhaps still mark the ending of the job with an event for yourselves, despite our because of the news?
March is also a great month to retire as an employee because you are working your notice upto the end of the financial year and so a lot less pressure during this high pressure and stress period.
One financial issue you should perhaps have mentioned James is how the revenue treat your first withdrawal from a DC pension. You don't want to get on and emergency tax rate...
This is a very good point, which gives many retirees a shock!
I do not fully understand how tax codes work through HMRC, but it seems like if you have two different PAYE income sources in the same year, they apply an emergency code to the second one.
So in theory, you could avoid this if you retired in March and had first pension PAYE payment in April the following tax year.
Perhaps there's an accountant who can confirm?
That's true, although when I took a lump sum and paid emergency tax I applied for a refund right away and it only took two weeks, so it wasn't that bad.
@@JamesShack There's something about taking your first withdrawal as £1 that an accountant can explain...
Like working for 2 employers...you have to nominate which one to receive your personal allowance on & the other is taxed in full. The £1 is to force a new code from hmrc before taking the taxed part of your pension. If you retire in line with tax year this 'shouldn't' matter.
Love this kind of content, even for a mid thirties viewer!
@@kat3400 makes me think about retirement a bit too early mind!
Oh my goodness James! 😳 everything was fine until you did the how many summers graphic 😢, I'm 65 next month so, happily I may only have 10 summers left! 😳🤯. I will be state pension age at 66 and it was interesting to hear the idea regarding maybe waiting until March to retire and be able to enjoy the improving weather. I could also defer accessing my pension for 18 weeks which I believe would gain me a 2% increase. 🤔 clouds and silver linings and all that. 😊
Helen is in trouble. How does she think she’ll cope with a £12,000 p.a. annuity when she has previously been earning £55,000 p.a.? It’ll be 10 years before her state pension kicks in. My advice to her would be to stay in work and save like a demon
On a £180k DC pension, and retiring at 57, Helen is going to have a bit of a struggle, until 67, 10 years later, when she starts to get the State pension. I recommend she starts a "side hustle" (to use the execrable jargon) by opening an Only Fans channel.
Only Grans
Awesome video, thank you James
Great video James and really sensible advice about planning how and when to stop…it’s not as easy as it sounds if you enjoy what you do.
I’m going on to 67 (currently 64) and have been in semi retirement since 60 doing 2 days a week but dropping down to 1 day a week from next year.
I definitely get the sentiment about loss of status and feeling you’re making a contribution…I need to get my head round that by 2027!
Nice video. The last point - last and not least
Another great video and we have communicated before. I retired at the end of January, but working for an American company that works on calendar years meant that I almost maximised the financial aspect including bonus into the pension before the new tax year, and I do not need to touch this DC pension as I have two reduced value DB pensions together with another DC pension to use for 2024/25 and part of 2025/26 tax years. I had a blood test last December which resulted in me being deemed pre-diabetic so needed to attend a course. Retirement has enabled me to reduce stress from work, and a more healthier lifestyle. Used some of your suggestions from your trading income video for effectively pocket money, and keep my mind and body trained with various things. I have always had hobbies that I can devote more time to as well as enjoy my surroundings as you realise the smells and sounds more now than you used to. I have lost weight as well.
Excellent video James on a topic that I haven't seen given much focus. Personally I'd been thinking of a date towards the end of Spring for similar reasons than those you outlined in the 'Health & Wellbeing' section. Unfortunately this doesn't align well with my company's bonus date! 😂
Investing in stocks might seem simple, but finding the right options is challenging without a solid plan. My portfolio is valued at $350K, I have $10K in an HSA, and a property with the potential for an additional $200K, yet my investments have stalled due to unclear entry and exit strategies. I’d welcome any suggestions for creating a steady income stream as I near retirement.
This is exactly how many individuals feel when managing their own portfolios. I suggest working with a financial advisor for more strategic investment decisions. This is the reason I entrusted my investments to a fiduciary. Many people don’t recognize the significance of financial advisors until emotional decisions lead to losses. My financial advisor, Kris Lizette Dornbush, designed a strategy tailored to my long-term goals, guiding my entry and exit points for equities. My portfolio has now grown to over $850K, my highest so far. You can find her contact details easily through a search.
Wow! This seems like a life-changing opportunity. I could really benefit from this advisor's knowledge. How can I best contact her? With research indicating that 45% of retirees face financial difficulties, I want to make sure I'm not one of them.
Over the years, I’ve been involved in numerous trading programs, often feeling lost in a sea of information. Kris’s insights, however, provide a level of clarity and depth that is unmatched-like discovering a diamond amidst coal. To reach her, simply look up her full name online for the contact information you need to arrange an appointment.
Well the plan/decision deadline was tail end of August.
Numbers already worked out by April - so just a waiting game to really test why I was still working.
The last-straw meeting meant I ended up handing notice in May.
So - best laid plans - thats a few months of summer to settle into the new retired routine.
No deadlines anymore! 😄
Great advice thanks. 👍
Another point worth considering is that DB pensions that are in deferment are revalued every year on the anniversary of you leaving. With high inflation years it may be worth holding your retirement for another year to take advantage of this.
Is that true. Ours get revalued at the start of the tax year using the September CPI figure.
@@MrDuncl might be just my scheme. I know a full year revaluation is on the anniversary of deferment (leaving) and shows on the pension website early jan (in my case).
If I had known how much I would live retirement I would have done it 40 years ago. 😂😂😂
Well I had planned on retiring April 2024, but was made redundant in Nov 2023. When I looked at severance package, plus a small pension pot accrued while working for the company it effectively funded me through to April 24.
I had already checked my plans via a pensions advisor, then pension wise and lastly my son a recently qualified financial advisor.
From April 24 accessing a crystallised DC fund, utilising my tax allowance, in Feb 25 I’ll start to receive a DB pension allowing me to reduce monies coming out of the DC fund, plus cash lump sum, some of which will go into a second DC fund (£2880) then another £2880 in the 25/26 tax year.
I then have to wait till Feb 26 for a full state pension, again allowing me to reduce the amount coming from the smaller DC fund.
Once state pension kicks in I’ll be receiving more monthly than I was earning net in my last job
My company went through redundancy processes recently and I know of a few people that retired simply because the redundancy amount after many years would tide them over to a key date (accessing pension age) or triggered a 'sod it' response. One even was planning on retiring and the proposed redundancy date fell 1 day before, lucky so-and-so (especially since they didn't look that old)!
@@AgileSnowWeasel The best I have heard of was 15 months money to retire two years early. It is waiting for a deal like that which keeps me at work. In contrast I knew one person who asked HR about early retirement and they said "fill in this form". About a fortnight later the company announced a big round of redundancies. The person was told that they would miss out on any redundancy money as they had already put in writing that they wanted to leave. That cost them over a years wages.
This is very timely for me, well no actually, maybe the opposite. I retire next Tuesday at the age of 61. I’d always thought to myself that spring would be the best time to go and that the beginning of November would be the very worst, but because I had to sell my business to retire, here we are.
I’m going to take on board what you said about setting the tone at the beginning and I need to find some big event to kick it off in a positive way, I don’t want to get in a rut of self imposed isolation due to weather. Thanks for your videos over the last few years, they’ve been really helpful.
Brilliant video and advice! My DB pension kicks in January 2025. But I'm retiring end May for all the reasons you mention (and in comments). Bonus dates + planning near 100% Salary Sacrifice for the first few months of FY25/26 to my DC pension + Easter/May Bank Holidays with accrued leave means I get max £££ and still finish at Easter.
I retired in November 2024 when I turned 60, I took a reduction in my occupational pension but for me it was worth it. The job was awful and actually no longer exists, but my deciding factor was that i don't come from a long lived family and I didn't want to die still working. I flippin' love being retired!
really interesting video. Never given the mental aspect of retirement just focusing on maximising my SIPP each year. Suspect many people do the same
I decided to finish 31st December. Got Xmas holiday pay from work. Plus it can take quite a few weeks, a couple of months in my case for pension company to organise payments. Just all fell into place for me by the end of the tax year at the end of March.
Worth noting how important working One More Year is. If you quit right when you hit your target, you're likely to have a rough start, because by conditionality your investments likely did over-the-odds well to get you to that target.
Makes a lot of sense 👌something to definitely consider, great and informative 👌
Glad you think so!
Interesting video - I chose to retire at the end of May because there that maximised the number of bank holidays in the run up to that date, which together with unused leave allow me to stop working a few weeks earlier.
I'm planning the exact same in 2025 🙂
Depends on the bastard factor in play at your work regarding bank holidays vs personal holidays. But still, I'd let Easter roll by for the cheap 10 days in a row, then hope to be given no work for the final month before leaving drinks.
The company I work for does a "wind down". Six months as a 4 day week then six months at 3 days. It is supposed to incentivise the department to do a proper handover and succession planning but the message doesn't seem to have got through recently.
Another factor - on my scheme the actuarial pension reduction for early retirement counts down in complete months from the standard birthday related date. I was born on the 22nd, so retiring on the 21st instead of the 22nd would shrink my pension by about 0.3% (2015 figures). The difference isn't huge, but every little helps.
For most people it's not a big deal when you retire, quite frankly. March is good for tax purposes, but it makes very little difference at the end of the day. I would prefer to retire in June, so that I have the summer to look forward to.
Well that's kind of his point. Retiring in March means you have spring/summer to still look forward to, but have the tax efficiency too. I agree it's no big deal, but worth considering for some.
I think I'd prefer April or May because if I retired in October I'd be onto plan B which is trying out every pub in the evenings in the local city which might turn out to be lifespan-dehancing.
Very interesting video .. I only managed to skim it . Did you mention about ‘Helen’s’ unused pension contributions allowances from previous years if she had any ? I assume that is still allowed ?
Dude, place a cushion in front of you on your desk. You keep banging the table. My subwoofer says hello 😑
More and more people might face a tough time in retirement. Low-paying jobs, inflation, and high rents make it hard to save. Now, middle-class Americans find it tough to own a home too, leaving them without a place to retire.
The increasing prices have impacted my plan to retire at 62, work part-time, and save for the future. I'm concerned about whether those who navigated the 2008 financial crisis had an easier time than I am currently experiencing. The combination of stock market volatility and a decrease in income is causing anxiety about whether I'll have sufficient funds for retirement.
Yeah, I’m also closing in on retirement, and I have benefitted much from using a financial advisor. I didn’t really start early, so I knew the compound interest of index fund investing would not work for me. Funny how I pulled in more profit than some of my peers who have been investing for many years.
Please can you leave the info of your lnvestment advsor here? I’m in dire need for one
My CFA ’Stacy Lynn Staples ’ , a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
She appears to be well-educated and well-read. I ran an online search on her name and came across her website; thank you for sharing. I sccheduled a caII
March for the new golf season start
I had planned to retire in December but the pension I was going to draw pulled the plug on any withdrawals.
I ended up retiring end of the following March.
Financially it better but having the longer days to find things to do was a big bonus.
My financial advisor had said 12 months before that I shouldn’t retire when it was dark wet and cold!!!
Pension contributions aren't just limited by your salary. A contribution significantly larger than your usual annual contribution in the final year followed by drawndown will attract the attention of hmrc for recycling.
It's definatly worth being aware of the rules.
adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/recycling-of-tax-free-cash/
I am some way off (hopefully less than 7 years) and was originally using my birthday in late summer as target but then thought March seemed a better option to make the tax situation easier, then the more i thought about it,it made sense to accelerate the target(not delay!!) to march for the summer reason too. Once this was quite set in mind i then considered end of June as thats when bonus is paid but its not enough to be worth losing those months and if i really need the money at that point then the time isn't right anyway!
I think there's a kind of similar logic in scheduling personal surgery so that recovery occurs before a release in spring!?
Retire in November so you can prepare for Christmas. I love baking but haven't got the time so having the time to bake and have a proper Christmas wothout having to buy shit from the supermarkets would be wonderful
Next April will be fine for me, just waiting see if the budget messes up my financial plans and force me to start my pensions before then, hopefully they are not that stupid. Planning to throw a load of bonus in my DC pension in April 25 and will have used the max for the last 4 years already so in will be in a good starting position. If you think about your life most of have been in education from age 4 and then work 40 years plus so this is the first time in life most get the chance to do what you want and when you want i will definitely enjoy retirement 😊
Depends how much you earn, how much in savings etc. People earning say 15k-20k a month with savings, may want to retire around 3 months into the tax year, so all that money goes straight into the pension, live off savings the rest of the year.
Birthday in March. Seems fitting 😊
Need to remember this in 20 years!
Also - we’ve all had bad hair days…😂
In the Tax Efficiency section i thought if it was a new tax year, and with no other income you could withdraw £16760 (??) over that year, to give you £12570 tax free income, plus the 25% (£4190) tax free from your pension.
Can you do this one again in 8 days time please :)
😂😂 why?
Oh, after the budget 😂
I think you need to first clarify the rules around pension contribution and withdrawal for people to understand intricate details.
I'm aiming to retire sometime in the next 2.5 years. I will be 55 in April 2027. Ive recently been thinking about what month would be best to retire in and came to the same conclusions as you. Particularly having the new personal allowance.
@JamesShack Isn't it possible to carry forward unused pension contribution allowances from previous years? If so, Helen may be able to boost her pension regardless of the month of retirement.
This is really timely, and great information.
Unfortunately I can't make too much use of the advice as I've had the opportunity to take a severance package from my employer which will mean a welcome payout, but also getting slammed for tax. Nevertheless, it means I can leave 10 months earlier than planned.
As a high tax payer it is better to stop working in the middle of the tax year and start claiming the pension in the middle of the next tax year. That way you get a massive tax refund that can help finance the months that you didn't work.
Can you tell us about the ‘hack’ of earning less before retirement to pay less overall tax on pension? I just heard about this. Im 46.
Great well timed video, I have been looking two dates to retire, end of the finacial year for pretty much teh reasons you stated or my birthday, which is in August 2025, to finish on a round number, 70. So, thank you it looks like it is going to be the end of March. I am already drawing my state pension, which takes up most of my tax free allowance and I also have an Army pension and that will make the tax change on that tidy. Better let the company know, maybe keep them waiting until the new year.
I'm guessing halfway through the tax year is best? I worked for a year in Australia, with 6 months in two financial years, very tax efficient.
Great video
Very interesting. I have a civil service pension coning to me in three years (January) and i presume that my lump sum payment will be taxed (due to that tax year's earnings). I'm not sure if i can defer it beyond my 60th birthday, but it will be worth looking into.
Your tax free lump sum should be tax free. Or are you referring to another lump sum?
@@JamesShack thank you. My lump sum is tax free but my pension will be taxable. It might be worth deferring from January to the new tax year, as I would potentially have a full allowance to fall back on. Given that I only have 17 years of reckonable service, I will have to do the maths. Thanks again.
Well not watched the video yet. It alway made sense in my head that I would retire at the end of March to start the the new tax year. It's also as spring time and as the weather gets better I feel more positive, so would enjoy the start of my retirement more.
I guess in the next 12 minutes I'll find out if I'm right or wrong. 😬
Good points, however you didn't mention the tax threshold of £60k per year limit on paying into your pension fund ? Or am I missing something? Thanks
Generally - it is unlikely I will be a customer of James, not so high earnings, but even for me there is a lot of information to think about in his channel. For me every peny counts, and if I retire before 67 I will try to add the last year to my working years, and still stop working before winter. (i am not sure yet if to add it it must be enough NI paid (probably) and/or more than 6 months work in any tax year) I will have to wait (means live without money) to the next March to not to pay extra tax from workpension. (I dont want to take tax free 25% but UFPLS and maybe to defer state pension) Any tips where is a trap in thinking this way?
Best time to retire was yesterday 😂😂😂
Half of my pensions are in a career average DB scheme. It gets revalued at the start of the new tax year at CPI + 1% to a maximum of 6%. Once in payment the maximum increase is 2.5%. So retiring just after the start of the tax year could make a 3.5% difference in pension whether it is taken as a lump lump or monthly.
p.s. Are there any rules about pension recycling when you are still working. Can you really put a huge chunk of your salary into your pension in just before you retire?
Is the pension really more tax efficient than an ISA? That surprised me.
In the scenario given (lowish pension pot, early retirement, lowish pension annunity payout (and so minimal tax to be paid)) then maybe. But I was a little surprised as that wasnt something I had considred.
In a more typical scenario of reasonable pension pot (that is already enought to last you), normal retirement age, and pension income being taxed, then keeping the isa as an isa / source of extra tax free draw down income might be better. Main exception would be if want to boost the pension post for better inheritance tax planning.
The 1st day of the new tax year...or anytime in April May time...
That is the day my career average DB pension gets uplifted (CPI + 1%).
Hi James could you cover the benefits of taking drawdown
But working part time and continuing pension salary sacrifice and the tax free cash recycling rules ? I'm happy to discuss my planned scenario to add context .
This is hard because as soon as you take money from the taxable part of your pension, you trigger the MPAA which limits the amount you can put back into a pension to £10,000 per year.
You can put part of your pension into "drawdown" and take the tax free cash but as soon as you take money from the "drawdown" pot you trigger this limit.
Which means that most people only dip into this bucket when they no longer want to contribute to a pension.
So I could still put up to 10k per year into pension while drawing down, without breaching tax free cash recycling rules?
@@user-xh9tw7vr1r take a look at the flow chart here - adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/recycling-of-tax-free-cash/
If you retired on 5 April- wouldn’t that mean you also accrue the whole year of NI contributions for the state pension? If you left in March, you may only be a few weeks off this
You get a full year of NI as soon as you earn more than the equivalent of £242 per week.
My Birthday is in mid April I am just over 20 years away from retiring, so plenty of time to think about it and whatever circumstances happen at the time, but would I be better retiring at the end of April at the start of the new financial year or waiting to the following March end of the financial year when I will be closer to 69? I suppose it will be time vs money?
Given my birthday is at the start of the tax year, I'd have to wait 11 months to be tax efficient 😂
Why ? When James mentions march - I think this equally applies to April as he really means the end of march
Hi James, you mention that Helen can only contribute £20,000 (her earnings from the current ta year) but can't she carry forward any unused annual allowances from the previous 3 tax years?
I think these are 2 separate things. A person cannot usually receive tax relief on pension contributions worth more than 100% of their annual earnings. So Helen would only get Tax relief on the 20K. Yes, one can use previous 3 years unused allowance - but that's to keep you out of the £60K contribution limit.
That’s a good point, I’d be interested in James view on the technicality around this.
The maximum you can contribute in a year (and receive tax relief on) is the amount you earn through employment (or other pensionable income).
Therefore, you can only carry forward unused allowances from past tax years ,and receive tax relief, if you earn more than £60k.
E.g if you earned £100k you could potentially carry forward £40k, if you had the allowances available.
At last an example of realistic savings and pension values.. Not lie so many on you tube talking that "normal" people have over a million pounds in their pension pot and five hundred pounds in an ISA etc..
I'm a "financial planner", and I've "retired" hundreds of people. 🤣
🔫 pew pew
You could just hibernate for the winter
Or spend the winter in Thailand! 😊
What about using (carrying forward) unused annual pension allowances from previous years ?
If Helen Paid 8% of 55k (4.4k) in previous years she would have 92% of £55k unused, for each of the past 2 years.
That would allow here to pay in just over £150k.
FWIW, I did this a year ago (paid money from my ISA into my pension, to get access to unused annual allowance from 3 years earlier), so I hope I haven't got this wrong.
I presume you kept this out of the video to keep it interesting rather than labouring a point that won't interest most people.
This scenario is different from the one you first talked about, but if the thing that triggered Helen to retire was a large inheritance, then paying £150k into her pension and getting 20% tax rebate, might be a good idea.
The maximum you can contribute in a tax year, and receive tax relief, is limited by the amount you earn in the tax year.
So if you earn £60,000, the maximum you can contribute this tax year is £60,000.
In theory you can make contributions above this level, but you won't get any tax relief so it's not likely to make sense.
If you earned £100,000 in the current tax year, you'd have £60,000 of the 24/25 pension allowance to use, and you could carry forward £40,000 of allowances from past tax years (so long as they are unused).
Again, you can go above this limit but you won't get tax relief/you'll face a tax charge.
I retire in 2032 February from workplace I take it the workplace DB pension will start then to be paid to me? I also have opened a SIPP in 2023 as I only started paying into workplace pension in 2023.
I have cash ISA's and opened S&S ISA this year as I have been trying to improve my financial situation.
I was trying to work this out I don't know how the market in FTSE all cap global fund is going to perform in my SIPP and S&S ISA by then whether it would be up or down. So not sure if I should leave everything until March or April 2032 or April in 2032 for it to be tax efficient?
hopefully my state benefit will kick in and then my workplace DB pension.
Before I even go into the SIPP and S&S or cash ISA's.
Not sure how I am going to supplement/top up my income if need be whether from cash ISA's or S&S ISA or SIPP. I want to be tax efficient as much as possible. I am not certain how much I can put in my SIPP whilst I am working per year as salary is 28K per year and I still got another 7 years and 2 months of working before I retire. I have not been putting in anymore than £3k.
Would love your thoughts on above situation
Hi i retire January 2032.! You can save as much as you like into your SIPP if you havnt triggered any MPAA (money purchase annual allowance) A DB pension usually matures at age 60 or 65. Try put as much as you can into your SIPP and choose an ETF Global Fund,
If you had other sources of funds available to fund living costs, wouldn’t the following be the most tax efficient approach?: from the start of a new tax year salary sacrificing 100% of your salary (getting whatever match your employer gives you) until you hit your desired contribution for that tax year (and topping up previous years if you didn’t already). You’d might be several months into the new tax year when you do retire, but you wouldn’t have used any of your personal allowance.
I'm planning exactly this approach for a few months next FY.. Also, one should make sure that you are using all your pension allowance + any unused allowance in the previous 3 years. Especially for those earnign over 260,000 with tapered pension allowances
You can’t sacrifice 100%. By law your employer has to pay you minimum wage. I’ve been sacrificing the max for years and the implication of minimum wage going up each year more than pay rises and the frozen tax threshold means paying more tax and NI each year. Because the minimum wage goes up in April and pay rises at my company are in January, typically I’ve been able to set the sacrifice on an average for the year and gotten away with sacrificing too much for part of the year, however, on 2 occasions it was caught that I’d been sacrificing a couple of percent too much, the result was I had to reduce the sacrifice percentage and also my tax code was changed for 4 months or so at the end of the year to pull the extra tax required back by HMRC. I still saved a bit extra on the NI though (especially as my employer shares 50% of their saving). Long and the short you can sacrifice to minimum wage and then put the remaining % up to your income in a private pension only.
@@alecdurbaville6355very helpful!
@@alecdurbaville6355I found the jump from the 40k to 60k, a little too much to bridge in one go. But it does create a bit of a cushion to avoid over payments for the next few years at least.
I want to reduce my hours a couple of years before retiring at 60, should I wait till March to do this? I will then boost my salary with my pension pot?
Working a few months after April 5th to get past 52xLEL of £123 can get you another state pension contributing year, saving a £907 top up ( if I am reading it correctly )
Probably not worth it if you already have 35yrs qualifying NI years and therefore a full state pension.
Most employees would probably reach this point by their mid 50's.
Hi James, avid watcher and retiring in Dec this year. Could Helen in your example use the last three years of unused pension allowance in her final year?
Only if she earned more than £60,000 in the final year. You can carry forward three years unused allowances but you’re still limited by the amount you earn in the year.
This january coming for me, 50 with full NI contributions.
You'll have to wait 17 years for the state pension though.
@@TryDiy yup, probably minimum of 18 with proposed changes and there's bound to be more meddling into that timeframe.
retire in May, so your income in April and May are tax free using the new tax year's personal allowance
Additionally, the extra 2 months would also be credited with a full year of National Insurance (NI) contributions for state pension purposes, if your salary is high enough
In general, would someone working as a civil servant who's birthday is in November, is it best to retire on the birthday , say 60 , or at the end of the tax year ?
Gad produce tables that show the impact of going a month or two early. For an average teacher the difference will only be £10 per month so not really material.
@ianwall9152 Thanks for reply. That's a big decision for next year.
Civil Servants who work beyond pension age, are still entitled to pension at 60 (God bless McCloud!) but I don't believe you can take pension and pay to be more than your pre-pension total. Civil Servants I Know who work beyond this point go part-time and balance pension +part time pay. So still same salary for part time hours. Maybe this does not apply to you, but worth checking out
@@johnm3413 Thanks
Can’t you go back 3 years to maximise your pension contributions?
Yes, answer this one James, especially considering 40%
Only if your earnings are above £60k and then its 100% of earnings.
You can carry forward unused allowances from past tax years, but you're still limited by the amount you earn in the current tax year.
For example, if you earn £100,000 in the current tax year, you could contribute £60,000 for this year's allowance and carry forward another £40,000 from past tax years if you the allowances available.
But if you earn £60,000, the maximum you can contribute is £60,000. In theory, you could contribute more than this, but you would not get any tax relief.
@@JamesShack thanks James
Hi James, great video as usual. I turn 55 in Feb next year. I have £500k in my private work pension and I earn 80k per annum. I'm getting married in July 2025 and was thinking of taking 20k to pay for the wedding and honeymoon. I contribute £1000 per month to my pension and I'm not retiring until at least 62 years old. Am I making a mistake? I understand you can not give advice without having all the background about my circumstances and I will seek professional advice before hand but I'd value your input/opinion. Thanks
Are you making a mistake doing what ?? Getting married ?? Spending 20k in a wedding and honeymoon ?? Planning to retire at 62 ?? Contributing 1000 a month ?? Not be specific enough with your question for someone to be able to answer it ??
Why does this video have Nova Wealth Ltd listed as the essential owner of the publication? You’re not listed as a director of this company. Are you just a paid shill of two sharp elbowed wise guys?