Pensions

[Kompany Car]

Unless I am misunderstanding things, these two answers seems to be contradictory.

If you take 25% tax free from pot1 then surely you can take 25% tax-free from pot 2 at any point in the future? Which is what Millwallawayveteran1988 is saying.

GBC's comment about "across all your funds" seems to tie the two pots together. Have I misunderstood that comment?

The across "all your funds" is in relation to the maximum allowance which is £268,275. So yes you can take 25% from both but in total cash, when you add it all together it cannot exceed the maximum allowance.

So you could have 200k out of an 800k pension pot and 50k out of a 200k pension pot all tax free as in total its less than £268,275.
But if that second pension pot was say 400k, you would only get £68,275 tax free not £100k, everything else thereafter would be taxed at your marginal rate.

 

[dickie davies]

The across "all your funds" is in relation to the maximum allowance which is £268,275. So yes you can take 25% from both but in total cash, when you add it all together it cannot exceed the maximum allowance.

So you could have 200k out of an 800k pension pot and 50k out of a 200k pension pot all tax free as in total its less than £268,275.
But if that second pension pot was say 400k, you would only get £68,275 tax free not £100k, everything else thereafter would be taxed at your marginal rate.

Nice problem to have. A million plus pension pots

 

[mexico1970]

Cut your cloth accordingly and just enjoy your retirement, spending your life worrying about when you retire isn't good.

You need less when you have retired, unless you retire really early in which case get a fuckin' job already.

 

[Gareth Barry Conlon]

Unless I am misunderstanding things, these two answers seems to be contradictory.

If you take 25% tax free from pot1 then surely you can take 25% tax-free from pot 2 at any point in the future? Which is what Millwallawayveteran1988 is saying.

GBC's comment about "across all your funds" seems to tie the two pots together. Have I misunderstood that comment?

I found it quite difficult to get a solid answer on this. In the end I asked the Co pilot AI and it took a bit of prompting but eventually came back with the above.

It makes sense to do it that way otherwise its very hard to track and it would be an advantage to people like me who have multiple pots if it worked the other way.

 

[Kompany Car]

Nice problem to have. A million plus pension pots

Well you say that but its also a worry. There is a lot to be said for certainty in terms of income. If you have a high tolerance to risk and are happy to handle the ebb and flow of the market, then I agree, but most people aren't, even if they might be when they are accumulating their pot.

 

[hampshireblue]

Well you say that but its also a worry. There is a lot to be said for certainty in terms of income. If you have a high tolerance to risk and are happy to handle the ebb and flow of the market, then I agree, but most people aren't, even if they might be when they are accumulating their pot.

There are plenty that will have a £1m+ pot especially if they were in a decent DB scheme and worked for a single employer for many years.

I suspect the worries are significantly less and the risk easier to manage with a big pot. Imagine trying to get a £30k income from a £300k pot. A return of 10% needed after charges to avoid dipping into the capital sum. A £1m pot only needs a 3% return to achieve the same result.

 

[stonie]

Won't it increase the same whether you take it or not?

I would imagine so but honestly not got a clue, not really looked into it properly yet as still 13 months untill I can claim it, probably need to pay for a bit of advice sometime next year in relation to what is best to do providing this government doesn't move the goalposts from now till then

 

[Manchester33]

However it's made up you're limited to £268000 of TFC. I genuinely don't see there being a big reduction, if any, of TFC in the short/medium term. Imagine you were about to retire with a TFC of £250000 intending to pay off your interest only £250K mortgage and suddenly the limit was £200k leaving you with a £50k shortfall. It's political suicide. Giving 10 years' notice, maybe.

I disagree that it’s political suicide on the basis that there won’t be that many people in the position you’ve describe (probably hundreds, not thousands).

It’s somewhat unethical if they don’t give atleast a couple years notice, admittedly.

Private pensions should be left alone IMO.

I think the triple lock on state pensions has to go and inheritance tax should be restructured entirely (there are couples who get paid out £1m without paying a penny in tax). Neither will happen because that would be political suicide and all parties are more bothered about their popularity than the state’s finances.

 

[hampshireblue]

I disagree that it’s political suicide on the basis that there won’t be that many people in the position you’ve describe (probably hundreds, not thousands).

It’s somewhat unethical if they don’t give atleast a couple years notice, admittedly.

Private pensions should be left alone IMO.

I think the triple lock on state pensions has to go and inheritance tax should be restructured entirely (there are couples who get paid out £1m without paying a penny in tax). Neither will happen because that would be political suicide and all parties are more bothered about their popularity than the state’s finances.

I was using the figures as an example. Substitute the figures for lower ones and how it is spent but the principle stays the same. Whatever she announces will go to consultation by the industry and that same industry has to get its' systems in place to enforce changes made. It's not a quick process.

The government needs a relatively quick return on changes and that's why a cut in the 40/45% tax relief together with capping the annual amount paid in to say, £40k rather than £60k gives that return quickly.

I'm not sure what you mean about private pensions being left alone. Tax Free Cash and Tax relif on payments apllies purely to provate pensions.

 

[Kompany Car]

I disagree that it’s political suicide on the basis that there won’t be that many people in the position you’ve describe (probably hundreds, not thousands).

It’s somewhat unethical if they don’t give atleast a couple years notice, admittedly.

Private pensions should be left alone IMO.

I think the triple lock on state pensions has to go and inheritance tax should be restructured entirely (there are couples who get paid out £1m without paying a penny in tax). Neither will happen because that would be political suicide and all parties are more bothered about their popularity than the state’s finances.

There will be many more than you think, particularly those in their 40s who will be mortgage to the hilt due to house prices and spending their money raising children. At present its around 1 in 8 but that will almost certainly grow going forwards.
I know plenty of people in their 50s who are on interest only mortgages with the plan to pay thier mortgage off by pooling their and their wife's lump sum.
Not something I would do but many are very live for today or have no choice due to the housing costs in the area where they live. Renting in retirement is not a great plan.

 

[hampshireblue]

There will be many more than you think, particularly those in their 40s who will be mortgage to the hilt due to house prices and spending their money raising children. At present its around 1 in 8 but that will almost certainly grow going forwards.
I know plenty of people in their 50s who are on interest only mortgages with the plan to pay thier mortgage off by pooling their and their wife's lump sum.
Not something I would do but many are very live for today or have no choice due to the housing costs in the area where they live. Renting in retirement is not a great plan.

This last bit. The elephant in the room for future generations and a massive ticking bomb.

 

[BlueHammer85]

Cut your cloth accordingly and just enjoy your retirement, spending your life worrying about when you retire isn't good.

You need less when you have retired, unless you retire really early in which case get a fuckin' job already.

I love my job and happy to work till 70 if it meant to same level of work…

However, I don’t want to look like a FOC in the office and be out of place - wonder if others feel that sort of pressure as a reason to retire early.

 

[M18CTID]

I’m 40 and have 87k in work place pension pot… is that ok ?

I don't think that's too bad - certainly better than what mine was at 40! - but I suppose it depends on what kind of income you want from your pension when you retire. Assuming you're planning on working until you're at least 60, that's still got 20 years of contributions to add in/20 years of potential growth

 

[M18CTID]

This last bit. The elephant in the room for future generations and a massive ticking bomb.

Looking at the way rental figures are going, I agree. I genuinely feel for anybody who rents these days

 

[RobMCFC]

I found it quite difficult to get a solid answer on this. In the end I asked the Co pilot AI and it took a bit of prompting but eventually came back with the above.

It makes sense to do it that way otherwise its very hard to track and it would be an advantage to people like me who have multiple pots if it worked the other way.

I have multiple pots - even though I've worked in the same job for 29 years, the changes in owners means I have two "major" pots (major for me, not the multiple £100Ks mentioned by some :))

Anyway, I plan to cash in the first to fund semi-retirement in my early 60s, leaving the second pot until full retirement 3-5 years later.

 

[Gareth Barry Conlon]

I’m 40 and have 87k in work place pension pot… is that ok ?

Being 40 is great.

87k will rocket over the next 20 years if you keep paying in and the interest all accumulates.

In my late 30s my pension pot seemed so small I pretty much ignored it. I'd get the annual statement every year and then just feel disappointed. Late 40s now and over the last 10 years I've moved jobs a few times and I've had to keep track of all the various pots and doing that hasmade me realise how steady the growth is.

 

[flook]

I love my job and happy to work till 70 if it meant to same level of work…

However, I don’t want to look like a FOC in the office and be out of place - wonder if others feel that sort of pressure as a reason to retire early.

Whilst it wasn't a reason for my early retirement, looking around the offices I worked in (there were quite a few, I worked freelance) it was noticeable how few people there were in their late 50's and 60's doing my job. Whilst what I did wasn't physical, it was very mentally demanding from both a technical aspect and a time pressure aspect. As you get older, coping with these aspects is as difficult as maintaining a physical job, though in very different ways.

 

[BlueHammer85]

Whilst it wasn't a reason for my early retirement, looking around the offices I worked in (there were quite a few, I worked freelance) it was noticeable how few people there were in their late 50's and 60's doing my job. Whilst what I did wasn't physical, it was very mentally demanding from both a technical aspect and a time pressure aspect. As you get older, coping with these aspects is as difficult as maintaining a physical job, though in very different ways.

Yep, first very early stages for me.
But I’m no longer the spring chicken of the desk.

 

[flook]

Yep, first very early stages for me.
But I’m no longer the spring chicken of the desk.

it was a bit odd tbh, I seemed to go from being the youngest in the office to the oldest in the space of about 5 minutes :/

 

[Kompany Car]

Whilst it wasn't a reason for my early retirement, looking around the offices I worked in (there were quite a few, I worked freelance) it was noticeable how few people there were in their late 50's and 60's doing my job. Whilst what I did wasn't physical, it was very mentally demanding from both a technical aspect and a time pressure aspect. As you get older, coping with these aspects is as difficult as maintaining a physical job, though in very different ways.

Yep you always tend to get the comments that if you work in an office environment then its easy. Might be if you work as a receptionist but not if you are working in a high pressure environment, on multiple projects, particularly if its safety critical where getting it wrong and fixing it later isnt an option.

If you do anything highly technical you know that by the time you hit your mid 50s you're nowhere near as sharp as what you were in your 30s, no matter how bright you are.

Theres a reason why air traffic controllers for instance in the US are retired off at 56.