I’ve just starting taking £1000 a month from my £500k pension pot. Royal London are ‘crystallising £4000 a month. Hopefully my un-crystallised pot will grow at a good rate over the next 10 years, before I run out of tax free withdrawals. Great video.
I'm 55 and haven't got a massive amount in my pension pot probably £100k but I'm going to take £25k now I might be brown bread in a few years no kids to leave it to live for now
In the days when you were forced to buy an annuity, the tax free cash made sense. Now with flexible drawdown, better to leave invested and continue to get 25% tax free on the uncrystalised growth. Can always access a lump sum if and when you need it. Love your relaxed presenting style.
Don't forget ISA's will become part of your estate when you snuff it and this might have implications in regard to inheritance tax whereas pension funds are entirely outside your estate. Clearly and as you say, any government could throw a spanner into the works, but I'd like to think two things here, A, they would be very unwise to alienate pensioners and B, hopefully there will be plenty of warnings before they did so.
@@dontuno I don't think this new government care one bit about older voters, so attacking all pension benefits (outside of public sector) are likely on their radar.
Take it! I’ve taken it from one of many larger pensions (I’ve a few pensions taken when I was a teenager and more along the way) and I’m no where near retirement age. Since I retired early my partner and I have lost many friends to cancer, Parkinson’s etc, some as young as 30, others in their early 50’s plus, never to enjoy their pension, free time or spending their pensions with their families. It’s rare to see people live past 80 these days. We want to enjoy our twilight years, spending time doing what we want and buying what we like, not leaving it to others.
Financial advisor always say invest your money. As I retired 5 odd years ago early and took the 25% to subsidise until I received my STATE PENSION. As you get older it’s time to enjoy the fruits of your labour not hang onto it for the government to take. It’s tax free so use it for yourself. The other option is to have drawdown which I choose not to take as the 25% is in my pocket not someone else’s.
When I retired I took 25% tax free from one of my pensions. Why? Because I'm a single homeowner and I lived paycheck to paycheck until I paid my mortgage off. I never had savings as I put it all into my pensions. So I took it just so I have the comfort of having the money if I need it.
If IHT protection on unused pension fund and/or reduction to Tax free cash limit currently £268,000 appears in this years budget in a few weeks time, please will you put an updated video out ? Thanks.
Another great video, interesting insights... I didn't realise that there was a limit on the 25% tax free element of your pension (LTA maximum, not that I am likely to achieve the limit, but still good to know).
another great video and very well presented. Not taking your TFLS is normally a good choice, but with recent investment fund performance and the crazy, unstable world we live in, it is going to be hard to convince most people to leave it were it is (despite the data and the long term approach theory). Especially those people who are post 60. Its a balance, how much money will you really need at 80 plus?
My understanding is you don’t have to crystallise the full pension amount in one go but can instead choose how much you want to crystallise and can do this multiple times. That makes it more interesting as you can vary how much you take each year and minimise tax liability alongside taking the tax free 25% each time.
Yes precisely! - You're right, exactly the point I make about leaving your pension uncrystallised and taking the 25% in stages. Too many people opt to take it in one go :-)
I have done precisely this, within a short period. I have two DC pots one is crystallised the other was not. In retiring I needed a Car as had been driving a company car, so took a lump sum to obtain this, leaving a portion crystallised and the rest uncrystallised. The pension provider shows my funds in total and more detail shows the size of both pots. The crystallised portion is still Growing as invested but has no tax free portion. The uncrystallised is also continuing grow. My aim is to leave this fund now until the pot that is crystallised with another provider has been used (potentially 4 years) as 1) for this tax year 24/25 I will use all my personal Allowance on the withdrawals giving me £12500 tax free then tax on anything above that. Feb 25, I have a DB scheme starting so will reduce the draw down out of the DC scheme to the monthly tax free amount. In 26 a full state pension so I will reduce further draw down from the crystallised DC fund. No point having money as you have said if it is gaining more interest invested. The DB scheme will also provide a nice lump sum in Feb to invest in ISA either side of the tax year. I have basically 10 Months to be a little bit cautious with my spending before my DB scheme boosts my income. I should be able to leave the larger DC pot untouched until 2028 or later allowing it to grow and possibly recover from the money I have already taken out.
@@johnporcella2375 Not if your total pot has reached the limit for the TFLS at just over £250k. You'll pay marginal rate tax on all of it as opposed to 0% up to £20,000 in a cash ISA. Unless there is a change in legislation. Then... if there is a change in legislation... there might not be a TFLS at all. That could never happen though, of course.
I took it and had the most enjoyable time of my life. In my hands, its mine! No 3rd party involved. I don't have to ask anybody can I have it. I also invested some of it in Gold. I haven't looked back since. 100% return in less than 5 years.
@3:45, you confused me! I thought income from a S&S ISA was tax free. So it wouldn't be "alternative source income like the State Pension or rental property" as you said. This is important to me, as I will soon be using my ISA to supplement my withdrawals from my SIPP top up my income, which is mainly my State Pension. The government got enough taxes out of me while I was working, I don't want to give up an unnecessary penny more in tax now I'm retired!
There’s a good reason to leave your 25% cash free lump sum in your pension pot. It increases the annual charges your IFA & Fund provider receives (I assume this lady is one?) by 25%. Moral of the story, one size doesn’t fit all. For some taking the 25% makes sense, for others it doesn’t. For me I took mine when I was 55 and bought a Villa. In the 5 years we’ve owned it, it has nearly doubled in value and we get a 12% yield. To anyone in the UK thinking about taking your 25% out be aware the new government are considering removing some or all of that 25% so the choice might not be yours to make much longer.
The current rush to extract the 25% is solely because of uncertainty about Labour policy in general and the upcoming budget in particular. I've noticed the higher fees on the drawdown balance. Will be tackling that at leisure once this stable door has been bolted. How about a video on how to transfer your drawdown balance into a SIPP?
Take the tax free option, you never know when your life time bomb is going to end, I am now 52 and will retire at 55, I don’t have a lot of money behind me to live a luxury lifestyle, but I want to enjoy this time of my life and enjoy the things I love to do!
Thank you for this video. This is fine for someone who is bloated with pension funds. For me I have a modest pot and I have income elsewhere so I have only taken 11k a year below my tax eligibility and used my invested tax free cash as I need it
I'm 57 and currently tracking 7 pensions from various jobs since my teen years (the first two being final salary - the good old days!). It's my intention to take out the 25% on the private pensions when I hit 60, pay off my then smallish mortgage and have a cracking holiday for my 60th birthday. I've lost many friends and work colleagues over the years (mainly cancer and road accidents) and everyday I'm thankful for still being here. I've no intention to work until state pension, I've set my target to retire at 62, my pension pot is healthy, and once the mortgage is paid, my monthly income will not be too short of what I'm taking home today. I could leave my pensions alone, but one big point is 'do you really want to work until you drop dead?'. For me, no, life is short and it's important to enjoy it when you can, if that means I'll quit a well paid job early to live on less then so be it, we all have our reasons. Always appreciate advice, thankfully I'm familiar with all the reasons provided. Anyway, back to my pension spreadsheet to make sure it's up to date :)
Getting hold of the tax free cash seems to have been a major factor in now retired colleagues retirement plans. After taking it it was burning such a hole in ones pocket that he upsized his house (which was probably a better idea than spending £60K on a new car like another did).
Some DC pension drawdown strategies involve a riskier portfolio pension pot (i.e., what you likely had all your life, mostly equities) and a ~2 year cash-buffer (to ride out downturns without crystallising the lower pension pot value and reducing success chance). Some or all of that 25% could be used to form that cash buffer if life somehow (divorce, etc) had arranged itself so that you couldn't build this yourself by retirement age. The other reason is mortgage payoff, unless you have a massive pension pot that you can continue to pay it off.
Stocks and shares/ cash ISA's are tax free so don't count towards taxable income. Whether you take 25% tax free income in one lump or spread it out over a number of years it is immaterial to any income obtained from cash or stocks and shares ISA's.
Can you pull the taxed part of a DC without touching the tax free? i.e. use the taxed part up to the 20% tax threshold then take the tax free later when other income (state pension etc) is pushing me over the bottom rate tax anyway. Do you have to in effect take the 16760, with the top 25% being tax free and the bottom 12750 using up the tax allowance?
You can crystallise and leave the taxable amount invested, but you can't do it the other way around. You could put the tax-free amounts into an ISA, if you so wished.
What about taking £20K tax free each year to move it into a stocks and shares ISA. Reason being gains and income in the ISA are tax free. Income from the pension is taxed above the tax free allowance. So if your pension income is above the tax allowance, having income from ISAs makes more sense. I know there are IHT benefits to the pension.
You answered your own question! Leaving the money in a DC pension fund gives it the same advantages as in an ISA, no Income Tax and no CGT, AND also NO IHT either, as a trust.
how is the 25% tax free cash calculated? is it based on your total pension pot on the day you turn 55? so let's say you don't take anything and 3 years later you decide you want to take it. by then you can assume that your pot will have grown so would the 25% based on this pot or the one when you turned 55? also, by the same token, what if you decide to take it in stages (for example, 10%, 10% and 5%), again, what is it based on?
It's based on the value at the time you crystallise (withdraw any tax-free amount) That's why it makes sense to only access it as you need it. A pot of 100k at 55 would yield 25k tax-free. If you took a small percentage each month over 10 years, it could be worth 200k and yield 50k tax-free, even after all the other tax-free bits had been taken out over the years.
Could you or anybody please clarify something said in the video? It is stated that if a pension fund holder dies after 75 years of age, the beneficiaries will pay Income Tax at their marginal rate "of the fund"! Can that be correct??? My belief was that they paid Income Tax on what THEY withdraw feom the oensiknnfund inheritance! Therefore, if they withdraw nothing, they pay nothing. Perhaps a video dealing with what happens to funds before and after 75 might help!
Can i just ask if i transfer a company pension to a flexi drawdown sipp does the government add 20 percent to it up to a 60k allowance or is that after i start paying extra contributions
The tax relief is on the contributions when they are first made not when you transfer to another provider. In any case, sounds like you are about to crystallise your pension if you are moving it into a drawdown, so congratulations on your retirement!
Thanks for your reply I think I've confused myself 😅,I've taken early retirement to look after someone and am 55 soon and don't need to take any money just yet as I have savings but I'm not sure if I should transfer company pension into a drawdown sipp for when I do need it ,and also if It would be beneficial to add to it with some of my savings,sorry for the long questions
If you have a Gauranteed Annuity Rate wouldn’t this be a good reason to not take the 25% cash as the cash is taken first and then the gauranteed rate is applied to the remaining 75%. Assume that the cash is not required (no debts, no mortgage) and that a regular income is required. I realise the gamble is that you need to live long enough and that you are also going to be paying some tax if over the threshold.
If you buy an annuity for the full amount you won't benefit from the tax-free portion, and it will be taxed when you exceed your personal allowance. I would put the tax-free amount into an ISA, and draw from that as I need it. If in doubt seek advice from an independent financial advisor.
Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got to talking about investment and money. I started investing with $150k and in the first 2 months, my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and get more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.
Hi. I’ve been forced to find additional sources of income as I got retrenched. I barely have time to continue trading and watch my investments since I had my second child. Do you think I should take a break for a while from the market and focus on other things or return whenever I have free time or is it a continuous process? Thanks
@@Marten_t However, if you do not have access to a professional like Clementina Abate Russo, quitting your job to focus on trading may not be the best approach. It is important to consider all options and seek guidance from reliable sources before making any major decisions. Consulting with an AI or using automated trading systems can also be helpful in managing investments while balancing other commitments
Hi, with the fast approaching Universal basic income and CBDC and cash being worthless day by day in the bank along with the reducing in march leading hopefully to abolition of inheritance tax .....its a flick of the coin...
This doesn't apply to (my) DB pension. You have to take a lump sum with the option of a higher lump sum and lower pension. You can work out how long you have to live before you're worse off if you taker the higher amount.
@@mark196233 depending on your age ATM , there is a very high chance your pension will not exist on retirement with whatever pot you have going on to your UBI allowance....if you sign up to it if course!..most people will be forced to through ignorance!
Hi Dianne, very helpful and has persuaded me not to take the full 25% tax free in one go. However, let's say I took 2% of it each year, does the tax free portion increase as an amount (not as a percentage) as the fund grows? So if I have, easy numbers, £200k total pot , so 25% is £50k, but in year 2 of my retirement the pot increases by 10% would I have 48% of £196k (£200k less 2%) left to take or, 48% of (£196K + £1.96K =) £197.96k, if the pot grows by 10%. In other words, is the 50% money limit set at a point in time, or is a percentage based on whatever the pension pot value is at a point in time and so the figures increase as the pot grows? You've got a new subscriber!
Yes you will get 25% tax free growth on any uncrytalised funds. Each time you take tax free cash 3x that amount is crystalised and no longer benefits from tax free status.
We are already in the big crash, Inflation is a catastrophe. This CPI report is a colossal failure. To bring the housing market to a halt, the FED will have to pull all the stops. The unfortunate issue is that other markets are being decimated. If you want to stay green, you have to rely on a lot of diversification. Currently up 14% and being careful. Still a better deal than leaving it in a savings or checking account yielding 0-1 percent interest.
People believe their currency has the worth it does because they have no other option. Even in a hyper-inflationary environment, individuals must continue to use their hyperinflationary currency since they likely have minimal access to other currencies or gold/silver coins.
Inflation is gradually going to become part of us and due to that fact any money you keep in cash or in a low-interest account declines in value each year. Investing is the only way to make your money grow and unless you have an exceptionally high income, investing is the only way most people will ever have enough money to retire.
How can I reach out to this coach? because I'm seeking for a more effective investment approach How good is this person at portfolio diversification, particularly with regard to digital assets?
My advisor is ‘’ "Stephanie Kopp Meeks. she’s highly qualified and experienced in the financial market. She has extensive knowledge of portfolio diversity and is considered an expert in the field. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market
I don’t plan to take my tax free cash from my DC pension in one go but I do think I should take the tax free cash from my work DB pension as a lump. Does this DB lump count towards the £250,000 lifetime tax free limit?
If I retire at 60, take 250k tax free and put it in the 'bank', then sure I can take 3k out of that per month for 7 years, essentially meaning I've a 3k tax free income until 67. Assuming I don't need more than 3k per month in that period, I'd start using the remaining 750k at 67 + state pension, and get tax normally on whatever I take out. Does that not make more sense than an annuity? I see a lot of people buying property abroad in the thread, but I think I'd just rather remain as tax efficient as possible and travel 6 months out of the year. Sound realistic?
Nice but you didn’t mention inflation hedge. If we place the whole 100% into an index linked pension then if we do have a period of high inflation it’s far more advantageous than having inflation eat away the real value of the 25% we took out. Naturally this is only a consideration for those that don’t have a need for the tax free lump sum.
'sitting somewhere else, doing nothing'- No. You invest it in the same way as your pension pot, only the draw from that is tax free unlike your pension pot. Move it into ISAs each year, to tax-free the gain. Or buy an annuity, you get a better rate from money outside your pension. Inheritance tax? Run this part down first. Remember, anything in a pension scheme is a hostage to fortune- rules change. Flexibility has value. Personally, most of my 'pension' savings were outside the pension system. And I paid no tax whatsoever on the majority of it- ever. Legally. Can you guess how?
@@egg399. In short- build big house, live in it until retirement, downsize and pocket tax-free gain. Worth more than the salary I earned during the 30 years.
Sure, I should leave it with my pension fund who has badly managed it for 30 years 😅 If it is performing worse than a passive index fund, why leave it with the pension fund who will keep taking their sneaky fees
I’d disagree with this. Unless you’re really poor, you’re in a race between the age of 55 (57 if you’re younger) and your state retirement age to maximise payments up to the higher rate. After that, your state pension takes almost all of your zero rate tax and you could be in danger of taking your pension at the higher rate which is burning money. Fiscal drag is reducing the threshold so the maximum that you can get out and in to a tax free wrapper is usually the right answer unless you’re using your pension as an IHT dodge.
When the labour government stops the tax free allowance, you’ll regret not taking it and spending it early in your retirement when you are capable of enjoying it.
When I am 55, could i start putting all of my salary into pension and then start paying myself from my pension? If get paid £4000 per month (for easy maths), then could I give myself £1000 tax free and then pay myself the £3000 taxed?
Unfortunately HMRC already thought of that :-). When you crystalise your pension and start taking an income from it, you can only pay back in £10k per year tax free instead of £60k (or your total earnings if lower)
@@DianneSullivan Ah. Okay. So if I start taking money from a pension fund then I can only pay in £10k per year from then on? I have a number of pension funds. Could I start taking money from one fund but still pay the full amount I to the non crystallised fund as before?
My view is take the cash, dont assume youll be around for years and years,ive known too many people who unfortunately werent around long enough to enjoy their retirement
I’ve just starting taking £1000 a month from my £500k pension pot. Royal London are ‘crystallising £4000 a month. Hopefully my un-crystallised pot will grow at a good rate over the next 10 years, before I run out of tax free withdrawals. Great video.
I'm 55 and haven't got a massive amount in my pension pot probably £100k but I'm going to take £25k now I might be brown bread in a few years no kids to leave it to live for now
Totally agree, same position.
In the days when you were forced to buy an annuity, the tax free cash made sense. Now with flexible drawdown, better to leave invested and continue to get 25% tax free on the uncrystalised growth. Can always access a lump sum if and when you need it. Love your relaxed presenting style.
Is it not wise to take the 25% tax free and move that into ISA's as the government could change the rules on the tax free withdrawl in the future?
Possibly if less than £40K lump sum for a couple. Otherwise you'd have to drip feed it over several tax years to keep any growth tax free.
Don't forget ISA's will become part of your estate when you snuff it and this might have implications in regard to inheritance tax whereas pension funds are entirely outside your estate. Clearly and as you say, any government could throw a spanner into the works, but I'd like to think two things here, A, they would be very unwise to alienate pensioners and B, hopefully there will be plenty of warnings before they did so.
@@dontuno I don't think this new government care one bit about older voters, so attacking all pension benefits (outside of public sector) are likely on their radar.
Labour gonna do this in a few weeks
Take it! I’ve taken it from one of many larger pensions (I’ve a few pensions taken when I was a teenager and more along the way) and I’m no where near retirement age. Since I retired early my partner and I have lost many friends to cancer, Parkinson’s etc, some as young as 30, others in their early 50’s plus, never to enjoy their pension, free time or spending their pensions with their families. It’s rare to see people live past 80 these days. We want to enjoy our twilight years, spending time doing what we want and buying what we like, not leaving it to others.
Financial advisor always say invest your money. As I retired 5 odd years ago early and took the 25% to subsidise until I received my STATE PENSION. As you get older it’s time to enjoy the fruits of your labour not hang onto it for the government to take. It’s tax free so use it for yourself. The other option is to have drawdown which I choose not to take as the 25% is in my pocket not someone else’s.
I took my 25% and bought Gold 3yrs ago, I’m very pleased 😀
When I retired I took 25% tax free from one of my pensions.
Why?
Because I'm a single homeowner and I lived paycheck to paycheck until I paid my mortgage off.
I never had savings as I put it all into my pensions.
So I took it just so I have the comfort of having the money if I need it.
If IHT protection on unused pension fund and/or reduction to Tax free cash limit currently £268,000 appears in this years budget in a few weeks time, please will you put an updated video out ? Thanks.
Another great video, interesting insights... I didn't realise that there was a limit on the 25% tax free element of your pension (LTA maximum, not that I am likely to achieve the limit, but still good to know).
We can all dream of having an LTA "problem". I'm pleased to hear you enjoyed this video.
another great video and very well presented. Not taking your TFLS is normally a good choice, but with recent investment fund performance and the crazy, unstable world we live in, it is going to be hard to convince most people to leave it were it is (despite the data and the long term approach theory). Especially those people who are post 60. Its a balance, how much money will you really need at 80 plus?
Good points - thank you
My understanding is you don’t have to crystallise the full pension amount in one go but can instead choose how much you want to crystallise and can do this multiple times. That makes it more interesting as you can vary how much you take each year and minimise tax liability alongside taking the tax free 25% each time.
Yes precisely! - You're right, exactly the point I make about leaving your pension uncrystallised and taking the 25% in stages. Too many people opt to take it in one go :-)
I have done precisely this, within a short period. I have two DC pots one is crystallised the other was not. In retiring I needed a Car as had been driving a company car, so took a lump sum to obtain this, leaving a portion crystallised and the rest uncrystallised.
The pension provider shows my funds in total and more detail shows the size of both pots. The crystallised portion is still Growing as invested but has no tax free portion. The uncrystallised is also continuing grow. My aim is to leave this fund now until the pot that is crystallised with another provider has been used (potentially 4 years) as
1) for this tax year 24/25 I will use all my personal Allowance on the withdrawals giving me £12500 tax free then tax on anything above that. Feb 25, I have a DB scheme starting so will reduce the draw down out of the DC scheme to the monthly tax free amount. In 26 a full state pension so I will reduce further draw down from the crystallised DC fund. No point having money as you have said if it is gaining more interest invested.
The DB scheme will also provide a nice lump sum in Feb to invest in ISA either side of the tax year.
I have basically 10 Months to be a little bit cautious with my spending before my DB scheme boosts my income.
I should be able to leave the larger DC pot untouched until 2028 or later allowing it to grow and possibly recover from the money I have already taken out.
@@DianneSullivanBy taking the 25% in small chunks, then if the remainder grows, you actually take more than 25% of the original sum.
@@johnporcella2375 Not if your total pot has reached the limit for the TFLS at just over £250k. You'll pay marginal rate tax on all of it as opposed to 0% up to £20,000 in a cash ISA. Unless there is a change in legislation.
Then... if there is a change in legislation... there might not be a TFLS at all. That could never happen though, of course.
@@Nobodyknowsmeanymore-n4f A fortunate problem to have!
Thanks Dianne. Lots of things to think about indeed.
Yes there are...hope this helped with some of your decisions
I took it and had the most enjoyable time of my life. In my hands, its mine! No 3rd party involved. I don't have to ask anybody can I have it. I also invested some of it in Gold. I haven't looked back since. 100% return in less than 5 years.
@3:45, you confused me! I thought income from a S&S ISA was tax free. So it wouldn't be "alternative source income like the State Pension or rental property" as you said. This is important to me, as I will soon be using my ISA to supplement my withdrawals from my SIPP top up my income, which is mainly my State Pension. The government got enough taxes out of me while I was working, I don't want to give up an unnecessary penny more in tax now I'm retired!
I think that is the point she was making .... SS ISA are tax free and can be taken along side any drawdown
There’s a good reason to leave your 25% cash free lump sum in your pension pot.
It increases the annual charges your IFA & Fund provider receives (I assume this lady is one?) by 25%.
Moral of the story, one size doesn’t fit all. For some taking the 25% makes sense, for others it doesn’t.
For me I took mine when I was 55 and bought a Villa. In the 5 years we’ve owned it, it has nearly doubled in value and we get a 12% yield.
To anyone in the UK thinking about taking your 25% out be aware the new government are considering removing some or all of that 25% so the choice might not be yours to make much longer.
The current rush to extract the 25% is solely because of uncertainty about Labour policy in general and the upcoming budget in particular. I've noticed the higher fees on the drawdown balance. Will be tackling that at leisure once this stable door has been bolted. How about a video on how to transfer your drawdown balance into a SIPP?
Take the tax free option, you never know when your life time bomb is going to end, I am now 52 and will retire at 55, I don’t have a lot of money behind me to live a luxury lifestyle, but I want to enjoy this time of my life and enjoy the things I love to do!
Thank you for this video. This is fine for someone who is bloated with pension funds. For me I have a modest pot and I have income elsewhere so I have only taken 11k a year below my tax eligibility and used my invested tax free cash as I need it
I'm 57 and currently tracking 7 pensions from various jobs since my teen years (the first two being final salary - the good old days!).
It's my intention to take out the 25% on the private pensions when I hit 60, pay off my then smallish mortgage and have a cracking holiday for my 60th birthday. I've lost many friends and work colleagues over the years (mainly cancer and road accidents) and everyday I'm thankful for still being here. I've no intention to work until state pension, I've set my target to retire at 62, my pension pot is healthy, and once the mortgage is paid, my monthly income will not be too short of what I'm taking home today.
I could leave my pensions alone, but one big point is 'do you really want to work until you drop dead?'. For me, no, life is short and it's important to enjoy it when you can, if that means I'll quit a well paid job early to live on less then so be it, we all have our reasons.
Always appreciate advice, thankfully I'm familiar with all the reasons provided.
Anyway, back to my pension spreadsheet to make sure it's up to date :)
You are only talking about DC pension schemes, does this apply to DB schemes?
Getting hold of the tax free cash seems to have been a major factor in now retired colleagues retirement plans. After taking it it was burning such a hole in ones pocket that he upsized his house (which was probably a better idea than spending £60K on a new car like another did).
Have your views changed since the Reeves budget? Thanks!
I'm 55 and taken my 25% tax free and paid off my house. Yahoo, that is why I worked since I was 16. No more worrying about these mad interest rates!
Some DC pension drawdown strategies involve a riskier portfolio pension pot (i.e., what you likely had all your life, mostly equities) and a ~2 year cash-buffer (to ride out downturns without crystallising the lower pension pot value and reducing success chance). Some or all of that 25% could be used to form that cash buffer if life somehow (divorce, etc) had arranged itself so that you couldn't build this yourself by retirement age. The other reason is mortgage payoff, unless you have a massive pension pot that you can continue to pay it off.
Stocks and shares/ cash ISA's are tax free so don't count towards taxable income. Whether you take 25% tax free income in one lump or spread it out over a number of years it is immaterial to any income obtained from cash or stocks and shares ISA's.
Yup, made me question the rest of the video when I heard that.
Can you pull the taxed part of a DC without touching the tax free?
i.e. use the taxed part up to the 20% tax threshold then take the tax free later when other income (state pension etc) is pushing me over the bottom rate tax anyway.
Do you have to in effect take the 16760, with the top 25% being tax free and the bottom 12750 using up the tax allowance?
You can crystallise and leave the taxable amount invested, but you can't do it the other way around.
You could put the tax-free amounts into an ISA, if you so wished.
@@slayerrocks2 Thanks, yes - In the intervening month I've learned a lot, its quite a curve to understand all the options.
Took my TFLS. Invested in bigger property. Best investment ever
What about taking £20K tax free each year to move it into a stocks and shares ISA. Reason being gains and income in the ISA are tax free. Income from the pension is taxed above the tax free allowance.
So if your pension income is above the tax allowance, having income from ISAs makes more sense.
I know there are IHT benefits to the pension.
You answered your own question! Leaving the money in a DC pension fund gives it the same advantages as in an ISA, no Income Tax and no CGT, AND also NO IHT either, as a trust.
Apologies as just learning this. If I take £100 a month from my workplace pension pot will i get 25% tax relief on that monthly drawdown? Thank you
how is the 25% tax free cash calculated? is it based on your total pension pot on the day you turn 55? so let's say you don't take anything and 3 years later you decide you want to take it. by then you can assume that your pot will have grown so would the 25% based on this pot or the one when you turned 55? also, by the same token, what if you decide to take it in stages (for example, 10%, 10% and 5%), again, what is it based on?
It's based on the value at the time you crystallise (withdraw any tax-free amount)
That's why it makes sense to only access it as you need it.
A pot of 100k at 55 would yield 25k tax-free.
If you took a small percentage each month over 10 years, it could be worth 200k and yield 50k tax-free, even after all the other tax-free bits had been taken out over the years.
Could you or anybody please clarify something said in the video?
It is stated that if a pension fund holder dies after 75 years of age, the beneficiaries will pay Income Tax at their marginal rate "of the fund"! Can that be correct??? My belief was that they paid Income Tax on what THEY withdraw feom the oensiknnfund inheritance! Therefore, if they withdraw nothing, they pay nothing.
Perhaps a video dealing with what happens to funds before and after 75 might help!
You should make it clear in the subject or detail it’s DC not DB you’re discussing.
Can i just ask if i transfer a company pension to a flexi drawdown sipp does the government add 20 percent to it up to a 60k allowance or is that after i start paying extra contributions
The tax relief is on the contributions when they are first made not when you transfer to another provider. In any case, sounds like you are about to crystallise your pension if you are moving it into a drawdown, so congratulations on your retirement!
Thanks for your reply I think I've confused myself 😅,I've taken early retirement to look after someone and am 55 soon and don't need to take any money just yet as I have savings but I'm not sure if I should transfer company pension into a drawdown sipp for when I do need it ,and also if It would be beneficial to add to it with some of my savings,sorry for the long questions
If you have a Gauranteed Annuity Rate wouldn’t this be a good reason to not take the 25% cash as the cash is taken first and then the gauranteed rate is applied to the remaining 75%. Assume that the cash is not required (no debts, no mortgage) and that a regular income is required.
I realise the gamble is that you need to live long enough and that you are also going to be paying some tax if over the threshold.
If you buy an annuity for the full amount you won't benefit from the tax-free portion, and it will be taxed when you exceed your personal allowance.
I would put the tax-free amount into an ISA, and draw from that as I need it.
If in doubt seek advice from an independent financial advisor.
Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got to talking about investment and money. I started investing with $150k and in the first 2 months, my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and get more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.
Hi. I’ve been forced to find additional sources of income as I got retrenched. I barely have time to continue trading and watch my investments since I had my second child. Do you think I should take a break for a while from the market and focus on other things or return whenever I have free time or is it a continuous process? Thanks
@@Marten_t However, if you do not have access to a professional like Clementina Abate Russo, quitting your job to focus on trading may not be the best approach. It is important to consider all options and seek guidance from reliable sources before making any major decisions. Consulting with an AI or using automated trading systems can also be helpful in managing investments while balancing other commitments
@@Richard-q1 Oh please I’d love that. Thanks!
@@Marten_t Clementina Abate Russo is her name
Lookup with her name on the webpage.
Hi, with the fast approaching Universal basic income and CBDC and cash being worthless day by day in the bank along with the reducing in march leading hopefully to abolition of inheritance tax .....its a flick of the coin...
This doesn't apply to (my) DB pension. You have to take a lump sum with the option of a higher lump sum and lower pension. You can work out how long you have to live before you're worse off if you taker the higher amount.
@@mark196233 depending on your age ATM , there is a very high chance your pension will not exist on retirement with whatever pot you have going on to your UBI allowance....if you sign up to it if course!..most people will be forced to through ignorance!
Hi Dianne, very helpful and has persuaded me not to take the full 25% tax free in one go. However, let's say I took 2% of it each year, does the tax free portion increase as an amount (not as a percentage) as the fund grows? So if I have, easy numbers, £200k total pot , so 25% is £50k, but in year 2 of my retirement the pot increases by 10% would I have 48% of £196k (£200k less 2%) left to take or, 48% of (£196K + £1.96K =) £197.96k, if the pot grows by 10%. In other words, is the 50% money limit set at a point in time, or is a percentage based on whatever the pension pot value is at a point in time and so the figures increase as the pot grows? You've got a new subscriber!
Yes you will get 25% tax free growth on any uncrytalised funds. Each time you take tax free cash 3x that amount is crystalised and no longer benefits from tax free status.
We are already in the big crash, Inflation is a catastrophe. This CPI report is a colossal failure. To bring the housing market to a halt, the FED will have to pull all the stops. The unfortunate issue is that other markets are being decimated. If you want to stay green, you have to rely on a lot of diversification. Currently up 14% and being careful. Still a better deal than leaving it in a savings or checking account yielding 0-1 percent interest.
People believe their currency has the worth it does because they have no other option. Even in a hyper-inflationary environment, individuals must continue to use their hyperinflationary currency since they likely have minimal access to other currencies or gold/silver coins.
Inflation is gradually going to become part of us and due to that fact any money you keep in cash or in a low-interest account declines in value each year. Investing is the only way to make your money grow and unless you have an exceptionally high income, investing is the only way most people will ever have enough money to retire.
How can I reach out to this coach? because I'm seeking for a more effective investment approach How good is this person at portfolio diversification, particularly with regard to digital assets?
My advisor is ‘’ "Stephanie Kopp Meeks. she’s highly qualified and experienced in the financial market. She has extensive knowledge of portfolio diversity and is considered an expert in the field. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market
She appears to be well-educated and well-read. I ran a Google search on her name and came across her website; thank you for sharing.
I don’t plan to take my tax free cash from my DC pension in one go but I do think I should take the tax free cash from my work DB pension as a lump. Does this DB lump count towards the £250,000 lifetime tax free limit?
4:23 The (old) LTA limit isn't £250,000, it's £268,275, and yes any lump sum taken from any pension counts towards your 25% TFLS.
Thank you
You are most welcome
If I retire at 60, take 250k tax free and put it in the 'bank', then sure I can take 3k out of that per month for 7 years, essentially meaning I've a 3k tax free income until 67. Assuming I don't need more than 3k per month in that period, I'd start using the remaining 750k at 67 + state pension, and get tax normally on whatever I take out.
Does that not make more sense than an annuity? I see a lot of people buying property abroad in the thread, but I think I'd just rather remain as tax efficient as possible and travel 6 months out of the year. Sound realistic?
Sort of similar.
If I understand this correctly. The sum in the bank, interest will be taxed more than the interest if left in your pension.
Nice but you didn’t mention inflation hedge. If we place the whole 100% into an index linked pension then if we do have a period of high inflation it’s far more advantageous than having inflation eat away the real value of the 25% we took out. Naturally this is only a consideration for those that don’t have a need for the tax free lump sum.
Took a very small amount and used the rest for a really good annuity, you couldn’t get that deal on the annuity now I guess.
No IHT under 75 for pension schemes left to someone else? Not for much longer.
i took it and reinvested it.
Good video…. One piece of well meant advice… sit on your hands.
'sitting somewhere else, doing nothing'- No. You invest it in the same way as your pension pot, only the draw from that is tax free unlike your pension pot. Move it into ISAs each year, to tax-free the gain. Or buy an annuity, you get a better rate from money outside your pension. Inheritance tax? Run this part down first. Remember, anything in a pension scheme is a hostage to fortune- rules change. Flexibility has value. Personally, most of my 'pension' savings were outside the pension system. And I paid no tax whatsoever on the majority of it- ever. Legally. Can you guess how?
go on do tell
@@egg399. In short- build big house, live in it until retirement, downsize and pocket tax-free gain. Worth more than the salary I earned during the 30 years.
Which country does your talk apply to?
UK
Sure, I should leave it with my pension fund who has badly managed it for 30 years 😅 If it is performing worse than a passive index fund, why leave it with the pension fund who will keep taking their sneaky fees
I’d disagree with this. Unless you’re really poor, you’re in a race between the age of 55 (57 if you’re younger) and your state retirement age to maximise payments up to the higher rate. After that, your state pension takes almost all of your zero rate tax and you could be in danger of taking your pension at the higher rate which is burning money. Fiscal drag is reducing the threshold so the maximum that you can get out and in to a tax free wrapper is usually the right answer unless you’re using your pension as an IHT dodge.
Totally agree.
When the labour government stops the tax free allowance, you’ll regret not taking it and spending it early in your retirement when you are capable of enjoying it.
Take it before Labour close the door
With NHS pension we have to take a large tax free lump sum
When I am 55, could i start putting all of my salary into pension and then start paying myself from my pension?
If get paid £4000 per month (for easy maths), then could I give myself £1000 tax free and then pay myself the £3000 taxed?
Unfortunately HMRC already thought of that :-). When you crystalise your pension and start taking an income from it, you can only pay back in £10k per year tax free instead of £60k (or your total earnings if lower)
@@DianneSullivan Ah. Okay. So if I start taking money from a pension fund then I can only pay in £10k per year from then on?
I have a number of pension funds. Could I start taking money from one fund but still pay the full amount I to the non crystallised fund as before?
@@DianneSullivanif they only take their TFC they can still pay 60k in p.a.
My view is take the cash, dont assume youll be around for years and years,ive known too many people who unfortunately werent around long enough to enjoy their retirement
It can't make sense to NOT use your tax free lump sum to pay off a mortgage.