New Pension Rules

[Doctor Houx]

Just want to be clear on a few terms. Please comment.

Headline rate = the highest rate of income tax I pay? Say 40%.

Crystallising = buying the annuity or other product that will keep me in beer and petrol in my old age.

Yes to the tax rate and sort of to Crystalising. This is the sum you take out either use to buy an annuity or the sum(s) you draw down.

This leads onto the other point about the LTA as the sum you crystallise each time you withdraw is taken as a % of the LTA at that time so say you withdrew £100k and the LTA is £1M then you have used 10% of your LTA. Only when you go over 100% of your LTA from all the withdrawals you have made Do you then pay 55% tax on all withdrawals over the 100% LTA.

Clear as I can make it, but see an IFA before making any decisions.

 

[redsonnylee]

Take advice, I’ve stopped paying into mine currently as near the limit. I have two final salary schemes and a defined contribution pot.
My understanding is that once you start drawing you’ve already used up x amount of you lifetime limit so be careful.

 

[gb-gta]

I suppose it’s also possible to trip up even if you stop paying in when your fund gets close to 1m.
If you stop at say 800k, but don’t want to draw it for 5 or 10 years if the fund does well it could easily be pushed well over the LTA level.
Its all a bit of a gamble in some respects, who knows what rules will change in the future too.
Bit of a first world problem though of course if your pension is up at that level.

 

[BillyBob]

As someone else wrote earlier, any crystallization event uses up a % of your lifetime allowance, based on the value of the lifetime allowance in place at the time. The lifetime allowance is supposed to increase every year, currently it is £1,073,100, last year it was £1,055,000. You would hope that an investment of £1,000,000 would grow by more than £18K in a year, so once you are close to that level you're almost certainly going over it. The only "good" news is that you don't start paying 55% tax until you've used 100% of your lifetime allowance, by which time you hope that your outgoings are lower and you can take the hit.

 

[Wanderer]

On the other hand a bus could hit you tomorrow....

I've had such a fukked up life I've made no provision for anything, I'll be working till I drop, my only hope is hanging on in Luxembourg for their generous state pension and what bits of Co. pensions I might have forgotten about but I'm happy with that, I can't stand doing nothing and I can't stand not having a purpose. However I've made my bed. It's not that I spunked money away, just never had any!

Longevity is not in our family gene pool so it's probably not an issue!

 

[CatmanV2]

Much similar here. Retirement is not on my schedule.

C

 

[Wattie]

Pensionwise.gov.uk

Get hold of this;

 

[zagatoes30]

Erm interesting, so based on the fact I don't pay any UK income tax can I draw down bigger chunks of my pension?Might need to go and investigate

 

[doodlebug]

I thought the same the last few years - I can't afford to retire. You don't need as much as you think.

Most of my money is in a managed SIPP. Its value went down a lot when Brexit won, It recovered. Its value went down a lot when COVID happened, It recovered. I don't understand investments much but I'm fairly relaxed that I'll be OK. If the **** falls out of it. I can still work and have been doing so on and off since I retired.

I count myself very fortunate compared to a lot of people living through this shite.

I highly recommend retirement.

 

[Wattie]

Erm interesting, so based on the fact I don't pay any UK income tax can I draw down bigger chunks of my pension?Might need to go and investigate

Not really as you ought to be declaring the Uk pension income in your country of residence......

That said, I’m sure you sent your respective Tax agency information on such but with the Covid chaos it probably got lost in the post.

I’m 55 today and have applied to remove my tax free cash. I intend to strip out as
Much as I can get of the balance as quickly and as tax efficiently as possible.
The trouble with pensions is that the majority of the money is “captive” within the vehicle and generally paid as an income.
As some have calculated this takes years and years to strip out (ignoring the fact it would be left to dependents in the event of death) etc
My concern is that this makes any captive element subject to rule change at the whim of any government, like the recent changes.
There’s gonna be an awful lot of Govt debt around in the next few years- who knows what they’ll get up to.

whatever u do, don’t buy an annuity.

 

[rockits]

Half of this talk and complexity is most of the reason I have never had a private pension outside of any old company schemes. I decided a long while ago I will make my own arrangements. I don't like the concept of substantial sums of my money tied up in vehicles/schemes also with people I don't trust.

I also didn't see there was much real tax incentive often as the latter income drawn is drawn as income so taxed the same as income anyway. Although the initial payment in was tax efficient you might be better paying the tax on initial pay in with tax free later after years of alleged maturity.

Of course there are pensions and there are pensions and SIPP's that vary wildly but I just prefer to keep and look after myself as feel I'm best placed and more incentivised to do so. I don't feel any pension funds or pots or people are really look after my best interests.

Also a big issues is you have years of risk that govts just keep changing rules screwing your pension further. Maybe a little negative and distrustful but not totally for no reason.

 

[Wattie]

Half of this talk and complexity is most of the reason I have never had a private pension outside of any old company schemes. I decided a long while ago I will make my own arrangements. I don't like the concept of substantial sums of my money tied up in vehicles/schemes also with people I don't trust.

I also didn't see there was much real tax incentive often as the latter income drawn is drawn as income so taxed the same as income anyway. Although the initial payment in was tax efficient you might be better paying the tax on initial pay in with tax free later after years of alleged maturity.

Of course there are pensions and there are pensions and SIPP's that vary wildly but I just prefer to keep and look after myself as feel I'm best placed and more incentivised to do so. I don't feel any pension funds or pots or people are really look after my best interests.

Also a big issues is you have years of risk that govts just keep changing rules screwing your pension further. Maybe a little negative and distrustful but not totally for no reason.

I agree. I think control is becoming more and more important.

 

[midlifecrisis]

Longevity is not in our family gene pool so it's probably not an issue!

Looking at my gene pool, I do have that problem, so until I enter the pearly gates backwards on fire, I'll happily receive donations for my pension.

 

[midlifecrisis]

Half of this talk and complexity is most of the reason I have never had a private pension outside of any old company schemes. I decided a long while ago I will make my own arrangements. I don't like the concept of substantial sums of my money tied up in vehicles/schemes also with people I don't trust.

I also didn't see there was much real tax incentive often as the latter income drawn is drawn as income so taxed the same as income anyway. Although the initial payment in was tax efficient you might be better paying the tax on initial pay in with tax free later after years of alleged maturity.

Of course there are pensions and there are pensions and SIPP's that vary wildly but I just prefer to keep and look after myself as feel I'm best placed and more incentivised to do so. I don't feel any pension funds or pots or people are really look after my best interests.

Also a big issues is you have years of risk that govts just keep changing rules screwing your pension further. Maybe a little negative and distrustful but not totally for no reason.

I agree but as you say company pensions are worth it when i chuck in 9% the company will give me 18%! The good thing is that I'm not tied to the company pension scheme, these can be put into another pension scheme.

 

[Wattie]

I agree but as you say company pensions are worth it when i chuck in 9% the company will give me 18%! The good thing is that I'm not tied to the company pension scheme, these can be put into another pension scheme.

Especially if your company pension is underfunded (99%of em)
Get your funds out Before the fan hits the sh1t.

 

[hashluck]

I’m 55 today and have applied to remove my tax free cash. I intend to strip out as
Much as I can get of the balance as quickly and as tax efficiently as possible.
The trouble with pensions is that the majority of the money is “captive” within the vehicle and generally paid as an income.
As some have calculated this takes years and years to strip out (ignoring the fact it would be left to dependents in the event of death) etc
My concern is that this makes any captive element subject to rule change at the whim of any government, like the recent changes.
There’s gonna be an awful lot of Govt debt around in the next few years- who knows what they’ll get up to.

whatever u do, don’t buy an annuity.

So presumably you are no longer contributing (or planning to)? As soon as I stop contributing I am taking the lot.

 

[daverichardson]

Like doodlebug I also recommend retirement as soon as you can.
I also concur that a company pension is a good vehicle.
These 2 points are totally different for each individual and you must cut your cloth.
However my experience tells me you don't need as much money as you think to retire in some sort of comfort (again individual).
I don't know if I would take the lot in one go though.
I self manage my funds and am still losing dosh, I know several people that have a managed portfolio and they all have recovered their money following Covid so may be worth thinking about.
I did a *** packet calculation as to how much I would need for my retirement. Some were wild guesses (how long would I live) others more educated (cost of a few holidays, one or two more cars, monthly outgoings)
Anyway I arrived at a figure and built in contingency. Pleased to say it is going well.
I have been retired many years now almost as long as I have been working but in that time I was a carer which counts as a job and that got me over the very difficult change of life from working to retiring.
Men must have something to do following retirement or you die

 

[Wattie]

So presumably you are no longer contributing (or planning to)? As soon as I stop contributing I am taking the lot.

Nope haven’t contributed for over 20 years. I control everything else.

 

[Wattie]

Y

Like doodlebug I also recommend retirement as soon as you can.
I also concur that a company pension is a good vehicle.
These 2 points are totally different for each individual and you must cut your cloth.
However my experience tells me you don't need as much money as you think to retire in some sort of comfort (again individual).
I don't know if I would take the lot in one go though.
I self manage my funds and am still losing dosh, I know several people that have a managed portfolio and they all have recovered their money following Covid so may be worth thinking about.
I did a *** packet calculation as to how much I would need for my retirement. Some were wild guesses (how long would I live) others more educated (cost of a few holidays, one or two more cars, monthly outgoings)
Anyway I arrived at a figure and built in contingency. Pleased to say it is going well.
I have been retired many years now almost as long as I have been working but in that time I was a carer which counts as a job and that got me over the very difficult change of life from working to retiring.
Men must have something to do following retirement or you die

I know I keep harping on.
Look at your “managed fund” return pa.
Compare to Gold.
Which did better?

I also know lots of men who retired and died. I suggest semi retirement.

 

[Wattie]

So presumably you are no longer contributing (or planning to)? As soon as I stop contributing I am taking the lot.

Hashluck you are clearly someone that’s credible and can give pointers (not advice) to assist many on here.
By the way your “taking the lot “ comment interests me- unless you’re 40ish