Retirement...when, how old and how much??

[city2]

12500 less 9500 personal allowance = 3000 per annum means you will be paying tax on most of your private pension apart from your 25% tax free

 

[dickie davies]

It won’t be tax-free. Just like when you are working, you’ll pay 20% tax on everything above the ~£12.5k threshold, regardless of where your money comes from (unless you’ve already factored that into your 24k figure?)

Anything over the tax allowance which is 12500 is taxable

17k annuity + 10k state pension = 27k
Take off 12.5k which is non taxable leaves 14.5k
20% tax of that is 3k
27 minus 3 = 24

 

[NJ Blue]

My parents in law have just gone through claiming their private pensions and it’s a nightmare. They have paid thousands to the pension provider to ‘advise’ them, and then potentially are going to get clobbered with tax.

I have a private pension, but would it not be better to put it into savings and then not be subjected to ‘advice’ fees and the taxman when you want to take some of your own money out?? Appreciate that you get taxed on savings interest, but the money lost to fees and tax is like a kick in the bollocks, it’s YOUR money FFS!

 

[dickie davies]

But what happens to the £250k after you die with an annuity? If you lose it, then that might not work for people wanting to leave an inheritence.

On the Aviva annuity planner, you can ring-fence ten years of payments

But even with drawdown, if you die at a certain age the pot of cash goes with you

 

[abu13]

My parents in law have just gone through claiming their private pensions and it’s a nightmare. They have paid thousands to the pension provider to ‘advise’ them, and then potentially are going to get clobbered with tax.

I have a private pension, but would it not be better to put it into savings and then not be subjected to ‘advice’ fees and the taxman when you want to take some of your own money out?? Appreciate that you get taxed on savings interest, but the money lost to fees and tax is like a kick in the bollocks, it’s YOUR money FFS!

It doesn't work like that, you cant just withdraw your pot without paying tax. In fact if you were to take the full pot you would be hammered with a tax bill, Sure the first 25% would be tax free but then the balance could well be taxed at top rate.

 

[Tommy_Catons_Perm]

My parents in law have just gone through claiming their private pensions and it’s a nightmare. They have paid thousands to the pension provider to ‘advise’ them, and then potentially are going to get clobbered with tax.

I have a private pension, but would it not be better to put it into savings and then not be subjected to ‘advice’ fees and the taxman when you want to take some of your own money out?? Appreciate that you get taxed on savings interest, but the money lost to fees and tax is like a kick in the bollocks, it’s YOUR money FFS!

Has the money you intend to put into "savings" been earned through employment? If so, you have probably paid tax on it already.

But money you pay into a pension scheme is not taxed. It is taxed when you withdraw it instead. However, under drawdown, the first 25% is tax free and rest is taxable at your marginal rate. In fact it is possible to withdraw it all tax free if the taxable portion is below your allowance.

In summary, pensions are tax efficient. Your are likely to pay far more tax on "savings".

 

[Tommy_Catons_Perm]

On the Aviva annuity planner, you can ring-fence ten years of payments

But even with drawdown, if you die at a certain age the pot of cash goes with you

The pot of cash goes to your nominated beneficiary.

 

[Mr Kobayashi]

How do the rich get round all the tax implications of your pension? They have it offshore?

They don't have "pensions" probably.

 

[NJ Blue]

It doesn't work like that, you cant just withdraw your pot without paying tax. In fact if you were to take the full pot you would be hammered with a tax bill, Sure the first 25% would be tax free but then the balance could well be taxed at top rate.

Thanks, yes I get that. I just wondered if savings is a better option with less to stump up when you want to get at your own money. The ‘advice’ fee off the provider was eye watering.

 

[Millwallawayveteran1988]

On the Aviva annuity planner, you can ring-fence ten years of payments

But even with drawdown, if you die at a certain age the pot of cash goes with you

You can leave your unused drawdown pot but it might be taxed on the beneficiary after the age of 75 depending on how they withdraw it and what tax rate they pay.

But what happens to the £250k after you die with an annuity? If you lose it, then that might not work for people wanting to leave an inheritence.

It’s an interesting one this, and whilst you can guarantee pots with annuities and provide for a spouse if you wish, many people still prefer drawdown for the death benefits they provide.

That shouldn’t be the reason for deciding on drawdown though for me except in a few circumstances. When you start saving into a pension, your objective isn’t to leave it behind for other people. It’s to build up a pot to enjoy your retirement. I think some people lose sight of what they saved for in the first place. Ideally you should spend every penny of your pension pot before you die. Maybe leave enough for a spouse but they should then spend it. The only exception I would say are people who have other savings/investments and an IHT liability. In these situations, the pension wrapper is a useful IHT shelter and it is often better to use other sources first.

In my experience, many people tend to over save and under spend, as the fear of the rainy day is always there. However, time really does tend to catch up with people and spending drops as you get older. The nightmare of care home fees is always looming large though.

 

[NJ Blue]

Has the money you intend to put into "savings" been earned through employment? If so, you have probably paid tax on it already.

But money you pay into a pension scheme is not taxed. It is taxed when you withdraw it instead. However, under drawdown, the first 25% is tax free and rest is taxable at your marginal rate. In fact it is possible to withdraw it all tax free if the taxable portion is below your allowance.

In summary, pensions are tax efficient. Your are likely to pay far more tax on "savings".

Yes, any savings will be after PAYE, so will be taxed already. It’s a minefield and I’m just thinking about how to be kicked in the bollocks as little as possible when, and if I ever get to retirement!

I get that a pension is tax efficient when you put the money in, but then it can be financially painful to be able to use that money as you want to when the time comes. As with everything in this country, it’s bloomin’ hard work for the average Joe. Thanks.

 

[dickie davies]

The pot of cash goes to your nominated beneficiary.

I am mistaken and you are correct

I've searched it and if i understand it correctly, if you die before reaching 75 the drawdown pot can be passed on tax free
If you die after the age of 75 the pot is taxed at the beneficiary's rate

I was under the impression after 75 the pot couldn't be inherited

Even so, it would be very much in the retirees interest to explore all options
The ten year ring-fence could be worth more than a drawdown pot

One thing for certain is that it is a huge decision

A former work colleague has recently retired with a pot of around 400k
He made his decision to retire in Jan so his real option at that time was drawdown as annuity rates were crap

He's taking the 25% tax free in small sums as and when he requires, so the majority of the 400k always stays invested and in theory will grow to cover the tax free withdrawal and agreed drawdown he takes annually

 

[Tommy_Catons_Perm]

Yes, any savings will be after PAYE, so will be taxed already. It’s a minefield and I’m just thinking about how to be kicked in the bollocks as little as possible when, and if I ever get to retirement!

I get that a pension is tax efficient when you put the money in, but then it can be financially painful to be able to use that money as you want to when the time comes. As with everything in this country, it’s bloomin’ hard work for the average Joe. Thanks.

Yes. You have to teach yourself. There's plenty of info on the internet though. Martin Lewis MSE forum is good and I learned a lot from that.

 

[RobMCFC]

You can leave your unused drawdown pot but it might be taxed on the beneficiary after the age of 75 depending on how they withdraw it and what tax rate they pay.


It’s an interesting one this, and whilst you can guarantee pots with annuities and provide for a spouse if you wish, many people still prefer drawdown for the death benefits they provide.

That shouldn’t be the reason for deciding on drawdown though for me except in a few circumstances. When you start saving into a pension, your objective isn’t to leave it behind for other people. It’s to build up a pot to enjoy your retirement. I think some people lose sight of what they saved for in the first place. Ideally you should spend every penny of your pension pot before you die. Maybe leave enough for a spouse but they should then spend it. The only exception I would say are people who have other savings/investments and an IHT liability. In these situations, the pension wrapper is a useful IHT shelter and it is often better to use other sources first.

In my experience, many people tend to over save and under spend, as the fear of the rainy day is always there. However, time really does tend to catch up with people and spending drops as you get older. The nightmare of care home fees is always looming large too.

A lot of sense in there. I said this a couple of weeks ago, we get told all our working lives to put as much as you can into the pension pot but you need so much money when your kids are young and, like my case where I’m looking after 4 of us. There’s just no way you need massive amounts of money if you are lucky enough to get to your lates 60s and 70s.

Start putting into your pension early, but don’t overdo it. Live for today and if you get to retire, make sure you have a plan to spend most of your pot at a decent rate that prioritises doing things whilst you still have mobility and marbles!

No point being the richest person in the care home.

 

[NJ Blue]

Yes. You have to teach yourself. There's plenty of info on the internet though. Martin Lewis MSE forum is good and I learned a lot from that.

Thanks, I’ve another 20 odd years to go yet, but thought I would ask others on this as I’ve started to think about it a bit more, especially seeing the in-laws going through this recently.

 

[Millwallawayveteran1988]

Thanks, yes I get that. I just wondered if savings is a better option with less to stump up when you want to get at your own money. The ‘advice’ fee off the provider was eye watering.

Certainly more beneficial for higher rate tax payers using salary sacrifice. There are arguments to have a mix of the two if you can afford it.

A lot of sense in there. I said this a couple of weeks ago, we get told all our working lives to put as much as you can into the pension pot but you need so much money when your kids are young and, like my case where I’m looking after 4 of us. There’s just no way you need massive amounts of money if you are lucky enough to get to your lates 60s and 70s.

Start putting into your pension early, but don’t overdo it. Live for today and if you get to retire, make sure you have a plan to spend most of your pot at a decent rate that prioritises doing things whilst you still have mobility and marbles!

No point being the richest person in the care home.

It’s a fine balance. Financial subjects and money management should be taught in schools and universities and even in workplaces. It’s a complicated subject and industry, made more complicated by providers and regulators. Most people don’t understand it and as such tend to either avoid the subject altogether or use their mates as financial sounding boards and take everything they say as gospel.

I guess some care homes are better than others but to be be honest it’s like having a choice of supporting the rags or the dippers. Both options are shit and I’m guessing the quality of toilet roll is the same in either, whoever is wiping your arse.

 

[abu13]

Thanks, I’ve another 20 odd years to go yet, but thought I would ask others on this as I’ve started to think about it a bit more, especially seeing the in-laws going through this recently.

Believe me, you looking into this with 20 years left to go puts you well ahead of the majority of the population. The number of people i have spoken to in their late 50's and early 60's who just assume they will get by on a state pension is scary. Keep on reading and asking questions, you are giving yourself the best possible chance.

 

[A57 the snake]

We had a chat last week when I got my private pension statement.. decided to increase our mortgage payments rather than pay more into the pot . It’s a gamble but at least when we’re mortgage free I know where every penny what we earn is going . The intention is to hopefully when the mortgage is done to keep putting the same amount away for when I can call it a day.
Obviously we’ll take advice . But with a health scare I’ve had I don’t intend to be a slave to the Yankee dollar.

 

[Blue Maverick]

Believe me, you looking into this with 20 years left to go puts you well ahead of the majority of the population. The number of people i have spoken to in their late 50's and early 60's who just assume they will get by on a state pension is scary. Keep on reading and asking questions, you are giving yourself the best possible chance.

My mate is sane age as me is a plasterer, his body is fucked he’s blown all his money trying to bring two kids up on his own, he’s just moved into a council house his rent is £800 a month then bills etc, I asked him why he’s going to do when he retires he reckon the state pension is enough until pointed out it won’t even cover his rent! He’s has decent money all his life but spent it on clothes, cars etc. Then the two kids later have taken the rest, he’s totally fucked but just doesn’t realise it yet.

 

[RobMCFC]

My mate is sane age as me is a plasterer, his body is fucked he’s blown all his money trying to bring two kids up on his own, he’s just moved into a council house his rent is £800 a month then bills etc, I asked him why he’s going to do when he retires he reckon the state pension is enough until pointed out it won’t even cover his rent! He’s has decent money all his life but spent it on clothes, cars etc. Then the two kids later have taken the rest, he’s totally fucked but just doesn’t realise it yet.

It's incredible that people don't even understand the basics. With access to the internet, there's not really any excuse for not understanding roughly how much the state pension is and why you'd need at least some form of private pension.