Savings and Investments thread

Premature extrapolation

Rob7Lee said:

A question really for those over 55 or heading to that age with a DC pension.

is anyone NOT taking their full tax free 25% from pension (up to the cap) before age 75? With the new inheritance rules on pensions if you die after 75, aside from the tax free growth for keeping it in your pension (which can be dealt with) I see no reason not to take it in full?

I'm not in the same position as you are, but if I were then I would be taking the 25% as soon as I could. I would say that it is long odds on that the 25% cap will be reduced in the relatively near future, and in the extreme removed altogether. If that were to happen then the loss of the potential tax free growth with it wrapped in a pension blanket would be mitigated to a substantial degree by the growth you could achieve even if paying CGT on that growth. Or, if you can live comfortably in retirement on the remaining 75% pot then spend it while young enough to enjoy.

In the position where I can’t spend my pension (in draw down with Royal London but not touched) as due to illness. Don’t need the money! Will pass it to my wife. Can’t see any other way. 

Not over 75. Will done but will check with my solicitor if it needs updating. 

Vanguard launched an all world etf (inc small caps) VALL last week with 0.07% fees which I think positions them as the cheapest all world provider. 

Bitcoin bottom I think might be in - my SIPP holdings up about 25%. Wouldn’t be surprised to see ai money go into bitcoin in the next couple of years and then rotate into quantum computing stocks. 

Diebythesword said:

Vanguard launched an all world etf (inc small caps) VALL last week with 0.07% fees which I think positions them as the cheapest all world provider. 

Bitcoin bottom I think might be in - my SIPP holdings up about 25%. Wouldn’t be surprised to see ai money go into bitcoin in the next couple of years and then rotate into quantum computing stocks. 

I saw an article saying how some of the bitcoin "miners" are converting to data centres due to the fall in bitcoin price, would be interesting to know how difficult it is to pivot between the two

TelMc32 said:

I’m in drawdown and the schedule is to draw my £268,275 by 75. So effectively, two tax free elements to my monthly income - the personal allowance and the tax-free pot - and then the rest from the main pot.  Keeping myself under the top tax rate band, but having to be careful with dividends.

Thanks, exactly my thoughts, just to decide on taking it out over what period. As I'm likely to retire early, withdrawal by 75 will be very easy. However there is one added point that will probably make me draw the lot in one go.

In December 2027 I reach 55 and can access my pension, in April 2028 the age you can access your pension moves to 57. I'm yet to get clarity, but from all I can read, if I don't touch my pension before April 2028 I'll have to wait until I'm 57 which is at the very end of 2029. That period is my concern if government were to change any rules (knowing my luck they would on April 7th 2028!) I could be in Limbo.

I'll probably just take the hit knowing that a bit of growth for a few years will be taxed, but I can minimise that to a degree.

golfaddick said:

Rob7Lee said:

TelMc32 said:

I’m in drawdown and the schedule is to draw my £268,275 by 75. So effectively, two tax free elements to my monthly income - the personal allowance and the tax-free pot - and then the rest from the main pot.  Keeping myself under the top tax rate band, but having to be careful with dividends.

Thanks, exactly my thoughts, just to decide on taking it out over what period. As I'm likely to retire early, withdrawal by 75 will be very easy. However there is one added point that will probably make me draw the lot in one go.

In December 2027 I reach 55 and can access my pension, in April 2028 the age you can access your pension moves to 57. I'm yet to get clarity, but from all I can read, if I don't touch my pension before April 2028 I'll have to wait until I'm 57 which is at the very end of 2029. That period is my concern if government were to change any rules (knowing my luck they would on April 7th 2028!) I could be in Limbo.

I'll probably just take the hit knowing that a bit of growth for a few years will be taxed, but I can minimise that to a degree.

Something I'll have to get my teeth into because I've been previously informed that once you reach 55 next year you are deemed to be "of age" even if you don't take it at that point.

Will double check & update on here. 

This is what I am seeing on one pension site:

If you were born in December 1972, you can access your pension from your 55th birthday in December 2027 until 5th April 2028, but any unaccessed funds left after that date will be locked until you turn 57 on 6th December 2029. 

https://www.pensionbee.com/uk/blog/what-you-need-to-know-if-you-turn-55-between-april-2026-and-april-2028

So that is saying if I do nothing before April 2028 then I have to wait until I'm 57. 

Same here:

https://www.ajbell.co.uk/group/news/hmrc-clarifies-rules-minimum-pension-age-what-it-means-those-affected

Diebythesword said:

Vanguard launched an all world etf (inc small caps) VALL last week with 0.07% fees which I think positions them as the cheapest all world provider. 

Bitcoin bottom I think might be in - my SIPP holdings up about 25%. Wouldn’t be surprised to see ai money go into bitcoin in the next couple of years and then rotate into quantum computing stocks. 

There are two or three other world funds with similar fee's (ETF's) Invesco have one at 0.05%.

Rob7Lee said:

TelMc32 said:

I’m in drawdown and the schedule is to draw my £268,275 by 75. So effectively, two tax free elements to my monthly income - the personal allowance and the tax-free pot - and then the rest from the main pot.  Keeping myself under the top tax rate band, but having to be careful with dividends.

Thanks, exactly my thoughts, just to decide on taking it out over what period. As I'm likely to retire early, withdrawal by 75 will be very easy. However there is one added point that will probably make me draw the lot in one go.

In December 2027 I reach 55 and can access my pension, in April 2028 the age you can access your pension moves to 57. I'm yet to get clarity, but from all I can read, if I don't touch my pension before April 2028 I'll have to wait until I'm 57 which is at the very end of 2029. That period is my concern if government were to change any rules (knowing my luck they would on April 7th 2028!) I could be in Limbo.

I'll probably just take the hit knowing that a bit of growth for a few years will be taxed, but I can minimise that to a degree.

Yeah, I retired at 55 so the tax free element is on a 20 year drawdown schedule. My advisor keeps me updated on what they expect to happen, but I went a couple of years before you, so I don’t have to worry about that 55-57 change.  Good luck. 

Rob7Lee said:

A question really for those over 55 or heading to that age with a DC pension.

is anyone NOT taking their full tax free 25% from pension (up to the cap) before age 75? With the new inheritance rules on pensions if you die after 75, aside from the tax free growth for keeping it in your pension (which can be dealt with) I see no reason not to take it in full?

Lots of variables here and obviously depends circumstances, any joint income etc etc.

My wife took the max. tax free amount of £268K from her SIPP in August 2023 at age 57 primarily due to murmurings about what a likely change of government might mean for the tax free amount. She moved the balance of her SIPP into drawdown, although she hasn’t needed to take any income from it since then because of my DB pension and our combined investment income.

I think we used £20K of the £268K for her annual stocks & shares ISA contribution, £50K into premium bonds and then the rest probably put into fixed term cash deposits as we have enough exposure to the stock markets. The remaining SIPP fund she moved into drawdown has in 3 years increased 63% in value due to investment growth, reinvestment of dividends and obviously not taking any income.

Obviously a lot of good fortune with how markets have performed but in her case absolutely reaL downside in taking the maximum of £268,000 on which she will clearly have not enjoyed as big a return as 63%. If anyone was in a similar position, i would do the same, but again everyone has their own set of circumstances.

golfaddick said:

robinofottershaw said:

Rob7Lee said:

A question really for those over 55 or heading to that age with a DC pension.

is anyone NOT taking their full tax free 25% from pension (up to the cap) before age 75? With the new inheritance rules on pensions if you die after 75, aside from the tax free growth for keeping it in your pension (which can be dealt with) I see no reason not to take it in full?

Lots of variables here and obviously depends circumstances, any joint income etc etc.

My wife took the max. tax free amount of £268K from her SIPP in August 2023 at age 57 primarily due to murmurings about what a likely change of government might mean for the tax free amount. She moved the balance of her SIPP into drawdown, although she hasn’t needed to take any income from it since then because of my DB pension and our combined investment income.

I think we used £20K of the £268K for her annual stocks & shares ISA contribution, £50K into premium bonds and then the rest probably put into fixed term cash deposits as we have enough exposure to the stock markets. The remaining SIPP fund she moved into drawdown has in 3 years increased 63% in value due to investment growth, reinvestment of dividends and obviously not taking any income.

Obviously a lot of good fortune with how markets have performed but in her case absolutely reaL downside in taking the maximum of £268,000 on which she will clearly have not enjoyed as big a return as 63%. If anyone was in a similar position, i would do the same, but again everyone has their own set of circumstances.

Yes, as I always say, everyone's circumstances are personal to themselves and there is no "one size fits all" when it comes to financial planning.

However, and I mean this very kindly, you must be kicking yourselves (even if its only a little bit) to have lost out on 63% growth on the £268k tax free lump sum.  Especially when there had been no change to the TFC Allowance and interest rates on deposits & PB's have been c4% over the last 3 years.  

Not really. We are significantly exposed to the stock markets. Having enjoyed the gains over the last 20 years we are now happy to de-risk and receive 4-5% pre-tax on a portion of our portfolio. 

golfaddick said:

robinofottershaw said:

golfaddick said:

robinofottershaw said:

Rob7Lee said:

A question really for those over 55 or heading to that age with a DC pension.

is anyone NOT taking their full tax free 25% from pension (up to the cap) before age 75? With the new inheritance rules on pensions if you die after 75, aside from the tax free growth for keeping it in your pension (which can be dealt with) I see no reason not to take it in full?

Lots of variables here and obviously depends circumstances, any joint income etc etc.

My wife took the max. tax free amount of £268K from her SIPP in August 2023 at age 57 primarily due to murmurings about what a likely change of government might mean for the tax free amount. She moved the balance of her SIPP into drawdown, although she hasn’t needed to take any income from it since then because of my DB pension and our combined investment income.

I think we used £20K of the £268K for her annual stocks & shares ISA contribution, £50K into premium bonds and then the rest probably put into fixed term cash deposits as we have enough exposure to the stock markets. The remaining SIPP fund she moved into drawdown has in 3 years increased 63% in value due to investment growth, reinvestment of dividends and obviously not taking any income.

Obviously a lot of good fortune with how markets have performed but in her case absolutely reaL downside in taking the maximum of £268,000 on which she will clearly have not enjoyed as big a return as 63%. If anyone was in a similar position, i would do the same, but again everyone has their own set of circumstances.

Yes, as I always say, everyone's circumstances are personal to themselves and there is no "one size fits all" when it comes to financial planning.

However, and I mean this very kindly, you must be kicking yourselves (even if its only a little bit) to have lost out on 63% growth on the £268k tax free lump sum.  Especially when there had been no change to the TFC Allowance and interest rates on deposits & PB's have been c4% over the last 3 years.  

Not really. We are significantly exposed to the stock markets. Having enjoyed the gains over the last 20 years we are now happy to de-risk and receive 4-5% pre-tax on a portion of our portfolio. 

But you could have kept it in cash inside the pension.....tax free. Not taking it out & keeping it on deposit where you pay 20% or even 40% tax on the interest. 

bobmunro said:

golfaddick said: 

robinofottershaw said:

golfaddick said:

robinofottershaw said:

Rob7Lee said:

A question really for those over 55 or heading to that age with a DC pension.

is anyone NOT taking their full tax free 25% from pension (up to the cap) before age 75? With the new inheritance rules on pensions if you die after 75, aside from the tax free growth for keeping it in your pension (which can be dealt with) I see no reason not to take it in full?

Lots of variables here and obviously depends circumstances, any joint income etc etc.

My wife took the max. tax free amount of £268K from her SIPP in August 2023 at age 57 primarily due to murmurings about what a likely change of government might mean for the tax free amount. She moved the balance of her SIPP into drawdown, although she hasn’t needed to take any income from it since then because of my DB pension and our combined investment income.

I think we used £20K of the £268K for her annual stocks & shares ISA contribution, £50K into premium bonds and then the rest probably put into fixed term cash deposits as we have enough exposure to the stock markets. The remaining SIPP fund she moved into drawdown has in 3 years increased 63% in value due to investment growth, reinvestment of dividends and obviously not taking any income.

Obviously a lot of good fortune with how markets have performed but in her case absolutely reaL downside in taking the maximum of £268,000 on which she will clearly have not enjoyed as big a return as 63%. If anyone was in a similar position, i would do the same, but again everyone has their own set of circumstances.

Yes, as I always say, everyone's circumstances are personal to themselves and there is no "one size fits all" when it comes to financial planning.

However, and I mean this very kindly, you must be kicking yourselves (even if its only a little bit) to have lost out on 63% growth on the £268k tax free lump sum.  Especially when there had been no change to the TFC Allowance and interest rates on deposits & PB's have been c4% over the last 3 years.  

Not really. We are significantly exposed to the stock markets. Having enjoyed the gains over the last 20 years we are now happy to de-risk and receive 4-5% pre-tax on a portion of our portfolio. 

But you could have kept it in cash inside the pension.....tax free. Not taking it out & keeping it on deposit where you pay 20% or even 40% tax on the interest. 

When you get to a certain age, your comfort in exposure to risk diminishes significantly. Yes, hindsight is a wonderful thing but that 63% growth in the last three years could also have been a loss, or at least a lot less than 63%.

If one is happy with their accumulated wealth, has more than enough for a comfortable rest of life, and just wants safety, then de-risking is a very valid strategy.

Clearly I am not going to go into detail but both bobmunro and Rob7Lee’s comments reflect our position. The decision we made was not critical to our finances.