Pension Pot

[RobMCFC]

I think you may be mistaken with a tax free draw down, if you have taken the £80k up front then anything that remains is taxable.

It is taxable, but I won't have any other income for that period so the ~£12K I draw down will not breach the general income allowance.

 

[Corky]

I did that online and it came back with my full entitlement, however someone posted on another thread is can be inaccurate, whats your take on that please.

If you are contracted out of SERPS at all you will get a reduced amount even if you had 35 years not contracted out, otherwise you are getting the money twice is the logic. It shouldn't be an issue as your company pension has been increased due to contracting out.

 

[abu13]

It is taxable, but I won't have any other income for that period so the ~£12K I draw down will not breach the general income allowance.

I don't think it works that way but it would be worth getting checked out just to be on the safe side.

 

[dickie davies]

I'm not planning on paying much tax in the period between whenIi retire and when State Pension kicks in.

Ballpark figures: £320K pot and retiring 5 years before state pension age

25% lump sum tax free = £80K
Drawdown tax free amount each year, say £12K
Total = £140K for 5 years = £28K per year tax free.

Im just 59, mortgage free
My mum passed at 60 and dad at 72. I want to enjoy my retirement and if there's something I learned being on furlough it's that I don't miss work

 

[Gareth Barry Conlon]

I wish , I a joiner and never earnt big money , had a personal pension since I was 23 and it’s only worth £126k . I’m nearly 57 and the maturity date is 2026 . Is is what it is but my only concern is my body , slowly getting fucked . Bad back ect . No way can I see myself working to ll in 67

I know a few people in trades and most have nothing planned. For office jockeys you can keep going but at the same time the sedentary life style is a bit of a killer. My goal is to get to 55 doing what i do now - sat in an office chair most of my days but at some point I want to do something different. Even if its a driving job it would get me out and about. I know a guy who had a serious back injury and jacked in his office based career to be a posty. The daily walk does him a world of good. I could go for that.

 

[RobMCFC]

I don't think it works that way but it would be worth getting checked out just to be on the safe side.

I think it does. Maybe I didn't use the correct terminology:

- after you've taken the 25% tax-free lump sum, everything else is taxable
- So if you are using the drawdown as income, then everything you draw out over the £12500 allowance is taxable
- BUT if you take £12500 or less each year, and this is your only income, you are below the personal allowance and therefore won't be taxed.
- Obviously when you hit state pension age, the amount you can draw down tax-free is likely to be around £3000

Hopefully the experts will correct this if it's wrong!

 

[Tommy_Catons_Perm]

I think it does. Maybe I didn't use the correct terminology:

- after you've taken the 25% tax-free lump sum, everything else is taxable
- So if you are using the drawdown as income, then everything you draw out over the £12500 allowance is taxable
- BUT if you take £12500 or less each year, and this is your only income, you are below the personal allowance and therefore won't be taxed.
- Obviously when you hit state pension age, the amount you can draw down tax-free is likely to be around £3000

Hopefully the experts will correct this if it's wrong!

I think you are correct. Another way of thinking of it is that you can drawdown £16,667 from pension. 25% is tax free leaving £12500 on taxable at basic rate. Assuming no other income and tax allowance of £12500 then all tax free.

Note 1, the basic allowance is now £12570

Note 2. If spouse pays no tax then can transfer 10% of their personal allowance giving up to £18436 to withdraw tax free per year.

PS I'm no expert. Just did my own research. Bollocks I don't like the sound of that...too much like anti vaxx!

 

[GornikDaze]

I think it does. Maybe I didn't use the correct terminology:

- after you've taken the 25% tax-free lump sum, everything else is taxable
- So if you are using the drawdown as income, then everything you draw out over the £12500 allowance is taxable
- BUT if you take £12500 or less each year, and this is your only income, you are below the personal allowance and therefore won't be taxed.
- Obviously when you hit state pension age, the amount you can draw down tax-free is likely to be around £3000

Hopefully the experts will correct this if it's wrong!

You are correct. I’m not an expert but it is my job ;)

 

[BedsBlue68]

Hes a bit stubborn, my Sister who works for a Financial Advisor approached him to be his Power of Attorney, he said he was able to look after his own finances. I’ll look into what you have suggested and see if there’s anything we can do, he’s getting frail now and slowed down exponentially the last few years but thankfully still has his “marbles”, thanks.

Ive just set up all the bits (will Power of attorney etc) - i have a friend whose parents have had to go into a home and it has taken him 6 months and a good chunk of money to get POA through the courts. Worth doing. Plus my father had dementia and it was too late so they took half the parents house and half their savings for his costs. Thankfully we now have my mother protected

 

[hampshireblue]

I don't think it works that way but it would be worth getting checked out just to be on the safe side.

I do think he's right. Once the 25% tax free has been used, any drawdowns are subject to tax in the usual way including the first £12500 each year being tax free. At present I haven't taken all of my tax free lump sum and am using it to offset the tax I pay each year. So let's say I need £50000 total nett, that is made up of £20000 tax free cash and of the remaining £30000, I get my personal allowance of 12500 so only pay tax on £17500 at 20%, so only £3500 tax to pay in total. Figures are illustrative only BTW!!

 

[hammocity]

If you are contracted out of SERPS at all you will get a reduced amount even if you had 35 years not contracted out, otherwise you are getting the money twice is the logic. It shouldn't be an issue as your company pension has been increased due to contracting out.

Thanks, i went through the procedure online and it came back with £173 per week, ive been contracted out for just 7 years in total and been self employed for the last 10 years. I stupidly didn’t join pension schemes because I had heart problems at 30 and never expected to live this long!

Do you think someone like me with over 35 years contributions and the 7 years opted out would get approx 9k? Or, is the forecast inaccurate?

 

[flook]

Thanks, i went through the procedure online and it came back with £173 per week, ive been contracted out for just 7 years in total and been self employed for the last 10 years. I stupidly didn’t join pension schemes because I had heart problems at 30 and never expected to live this long!

Do you think someone like me with over 35 years contributions and the 7 years opted out would get approx 9k? Or, is the forecast inaccurate?

I'm in a similar position, but just 2-3 years CO, according to the government website I get full state pension. Last checked november last year, though it does come with the rider "is not a guarantee and is based on the current law"

An earlier forecast, possibly before the 2016 law change, did say I would lose £18 per week due to being CO, as that has now changed I can only assume that the law change and me having the required 35 years contributions means I get full state pension

 

[hammocity]

I'm in a similar position, but just 2-3 years CO, according to the government website I get full state pension. Last checked november last year, though it does come with the rider "is not a guarantee and is based on the current law"

An earlier forecast, possibly before the 2016 law change, did say I would lose £18 per week due to being CO, as that has now changed I can only assume that the law change and me having the required 35 years contributions means I get full state pension

Thanks for that, I’ll look into it again, remember having to do some verification through the Post Office which was a right pain.

 

[GornikDaze]

Thanks, i went through the procedure online and it came back with £173 per week, ive been contracted out for just 7 years in total and been self employed for the last 10 years. I stupidly didn’t join pension schemes because I had heart problems at 30 and never expected to live this long!

Do you think someone like me with over 35 years contributions and the 7 years opted out would get approx 9k? Or, is the forecast inaccurate?

This might be a good read - there’s various similar articles

How is my state pension affected by being contracted out?

I am a 53-year-old man who has worked since leaving school. I belonged to a company pension which required me to be 'contracted out' for 18 years. How will this affect my state pension?

www.thisismoney.co.uk

“One key point (which confuses many people) is that the COPE figure on the statement is just for information – you don’t have to do any maths or deduct it from any of the figures on the statement, as all of that has already been done.”

 

[abu13]

I think it does. Maybe I didn't use the correct terminology:

- after you've taken the 25% tax-free lump sum, everything else is taxable
- So if you are using the drawdown as income, then everything you draw out over the £12500 allowance is taxable
- BUT if you take £12500 or less each year, and this is your only income, you are below the personal allowance and therefore won't be taxed.
- Obviously when you hit state pension age, the amount you can draw down tax-free is likely to be around £3000

Hopefully the experts will correct this if it's wrong!

I am hoping you are right as that will make a huge difference to my plans for early retirement

 

[flook]

This might be a good read - there’s various similar articles

How is my state pension affected by being contracted out?

I am a 53-year-old man who has worked since leaving school. I belonged to a company pension which required me to be 'contracted out' for 18 years. How will this affect my state pension?

www.thisismoney.co.uk

“One key point (which confuses many people) is that the COPE figure on the statement is just for information – you don’t have to do any maths or deduct it from any of the figures on the statement, as all of that has already been done.”

This bit is the clincher I think

"However, the good news is that you may still get a full ‘flat rate’ pension of £175.20 when you retire. This is because all of the years you work from 16/17 onwards are adding to your pension and slowly wiping out the impact of the deduction for contracting out."

In my case my 2 or 3 years CO have already been made up, Hammocity probably still has a couple to go to get back to full SP

 

[abu13]

I have checked my state pension on the Government site and I have one year to complete before 2036 to hit the 35 year requirement. It states that my forecast is £179.60 per week. However it does say that I have been in an opted out scheme and there is a COPE estimate of £50.06 per week.

So I am unclear, will i get the £9,669 per year from the Government based on the £179.60 per week or would it be £6736.06 based on the £179.60 less the £50.06 per week?

 

[sky tot]

I know a few people in trades and most have nothing planned. For office jockeys you can keep going but at the same time the sedentary life style is a bit of a killer. My goal is to get to 55 doing what i do now - sat in an office chair most of my days but at some point I want to do something different. Even if its a driving job it would get me out and about. I know a guy who had a serious back injury and jacked in his office based career to be a posty. The daily walk does him a world of good. I could go for that.

You are spot on , none of the lads I work with have a pension .

 

[denislawsbackheel]

I did that online and it came back with my full entitlement, however someone posted on another thread is can be inaccurate, whats your take on that please.

When my Mrs was getting hers and we needed to buy back some lost years it was always made clear in the letter it was an estimate.

 

[denislawsbackheel]

Ive just set up all the bits (will Power of attorney etc) - i have a friend whose parents have had to go into a home and it has taken him 6 months and a good chunk of money to get POA through the courts. Worth doing. Plus my father had dementia and it was too late so they took half the parents house and half their savings for his costs. Thankfully we now have my mother protected

Power of attorney doesn’t protect you from having to pay for care.