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[Doctor Gollum]

A side note from that Mr Jim, if you can't trust your spouse with your combined money, then you probably shouldn't be married...

Yours is mine and mine is yours etc...

[Viral_Jim]

Would it be fair to say that a pot of £500k would sustain an income of £39k then 

A million pound pot may not be feasible to achieve, half would be within reach...

I'd say that depends largely on:
- what age you want to retire
- how your money is invested

If retiring before state pension age, a withdrawal rate of close to 8% is high and success would depend on having a 'good run' in the market, after state pension age, withdrawing £26.5k from £500k is more achievable at just over 5% but may well require course correction if the markets took a dip...

A side note from that Mr Jim, if you can't trust your spouse with your combined money, then you probably shouldn't be married...

Yours is mine and mine is yours etc...

100% my view, and why I have a divorce under my belt. Conscious not everyone is the same though

[LC0112G]

This is incorrect. You can continue to invest the 75% that remains undrawn in your crystallised pot - usually in identical funds/stocks/shares that they were invested in before they were crystallised. The crystallised funds do not have to sit there in cash.

It might be that your chosen provider does not support it, but most SIPP providers do.

Interesting, thanks for the correction, that must indeed be a 'feature' with my current provider. In which case I think my preferred approach would be to take my chosen level of tax free cash to supplement my regular income, plus £20k/£40k to fill up one or two ISAs (depending on being married and trusting your spouse with your money  ), then at least all the subsequent growth will be locked in as tax free. Otherwise if it grew inside your pension you might exceed the tax free cash amount over time and end up paying more tax than necessary.

Admittedly that's a very nice problem to have!

Once a part of the pot has been crystallised, if you keep it invested inside the pension wrapper then it can/will continue to grow tax free. However, you cannot ever take any more tax free cash from growth in a crystallised pot. You can only ever take tax free cash from the remaining un-crystallied pot. Therefore, you can't exceed the tax free cash limit by growth in the crystallised pot.

The distinction between leaving the cash invested in the crystallized pot and letting it grow there, and withdrawing it and putting it into a SSISA is marginal. In the SIPP the crystallised pot will grow tax free, and be taxed on withdrawal. In the SSISA it'll be taxed when you withdraw it from the SIPP, and then grow tax free in the ISA. Under current tax rules there is virtually no difference, but both options have a risk associated that the Govt will change the tax rates and rules, so there can be no correct long term answer. You'll only know which would have been better when you die.

[Doctor Gollum]

Need to get my shit a bit more together, but generally happy with where both my SIPP and current work pensions are invested...

Pretty much all in Mutual funds, and largely US based. No bonds and minimal cash as neither earn anything useful.

Where I have been able to with my work pension it's in related funds, if not the same ones as my SIPP. Work pot is averaging 19% from inception.

SIPP is currently at 211% over 10 years.

That's current value vs Inception value.

[LC0112G]

Would it be fair to say that a pot of £500k would sustain an income of £39k then 

A million pound pot may not be feasible to achieve, half would be within reach...

Too many if's and but's for a full answer, but...

Assuming you plan to retire at 67/68, and will have a full state pension (£12.5K ish), and you draw down 4% of your pot p/a then...

State pension = £12.5K
4% of £500K = £5K TFLS + £15K before tax @ 20%

So your 'take home' would be roughly £29.5K, which is equivalent to a working salary of about £36K.

I'd say £39K take home is going to need a pot size of more like £750-800K. Otherwise you're going to require a drawdown rate way above a 'safe' 4%, and there is a risk your pot could be exhausted before you climb the curtain to the choir invisible. Up to you if you want to take that risk though.

[tunnie]

I’m surprised you’ve not gone EV on sacrifice. It’s one of the best tax avoidance things around as far as I can tell. With the benefit of cheap hassle free motoring.

For the avoidance of doubt, as a bit bored of those that get an EV and becoming evangelists, much like vegans...

AN EV DOESN'T CURRENT WORK FOR US

Doesn't matter how expensive or cheap it is, if it doesn't work, it's a waste of money. Simples.

More as tax avoidance though, not the car!!! My push to get one was not the car. Not the running costs, not the service bit. Not actually anything relating to the car itself.

My main reason was to pull money away from the tax threshold. The savings in tax was key, in combination with pension contributions. All to max out what can be kept away from the government ludicrous stealth tax band.

If I had not ordered one it would have been more of a waste of money, as the option to keep the cash instead was far more depressing and gave far to much to the tax away.

[tunnie]

At least £1m as far as I can tell. But it depends on what life style you want, what bills you have etc.

A safe withdrawal rate on a pot is about 3.5-4%, rising by inflation, so likely the max you'd want on there is about £1.5m (in today's money). This would allow you to sustain c£50k withdrawals for life after taking the maximum tax free cash of £298k. Much above that and you're paying 40% tax on the money on the way out. Which still might be a good deal over all but it makes having to lock the money up until 58/59 much less attractive than it would be otherwise.

This is roughly where I'm hoping to be by 58 but a lot has to go right (and keep going right) to make it happen 

That said I would personally always keep putting in enough to get the employer match as investment returns aren't guaranteed and an instant 100% uplift in your money is the best you'll see.

I was reading some suggestions that spreading the tax free amount and not taking it as a lump sum can work better. Eg take 30k year and top up tax free by 20k or similar. To avoid the 40% tax.

Either way I still need way more than I have now!

It's swings and roundabouts.

You can either take the entire 25% up front, an then pay tax on the remaining 75% as and when you withdraw it.

Or you can cash in small 'chunks' of your pot, and take 25% of that 'chunk' tax free and 75% taxable.

The upshot is basically the same - by the time the pot is exhausted you will have paid tax on 75% of the pot.

I quite like the idea of crystallising (basically cashing in) £60K per year. You can then take £15K (25%) tax free, pay 0% tax on the first £12.5K, and 20% tax on the remining £32.5K. The effective tax rate is therefore less than 15%. By the time you take national insurance and other tax deductions into account, that's effectively the same take home 'pay' as a working salary of £80K. When your state pension kicks in at 67/68 reduce the amount you crystallise by your SP amount and continue.

The above strategy is a higher risk than some, and your initial pot will probably need to be north of £1M to sustain it.

This is my current plan. With annuity as a backup, as I like the idea of a fixed income and reliability.

But to get a 60k income and retire at say 50. I think I will need more like £1.75m?

[LC0112G]

This is incorrect. You can continue to invest the 75% that remains undrawn in your crystallised pot - usually in identical funds/stocks/shares that they were invested in before they were crystallised. The crystallised funds do not have to sit there in cash.

It might be that your chosen provider does not support it, but most SIPP providers do.

Interesting, thanks for the correction, that must indeed be a 'feature' with my current provider. In which case I think my preferred approach would be to take my chosen level of tax free cash to supplement my regular income, plus £20k/£40k to fill up one or two ISAs (depending on being married and trusting your spouse with your money  ), then at least all the subsequent growth will be locked in as tax free. Otherwise if it grew inside your pension you might exceed the tax free cash amount over time and end up paying more tax than necessary.

Admittedly that's a very nice problem to have!

If you trust your spouse....

There is nothing to stop you withdrawing money from your pension pot, and paying it into a pension pot for her/him. The govt will then top up your payment with tax relief at 20%. So for every £100 you pay in, her/his pot will grow to £125. There are some limits, but IIRC you can pay in at least £10K p/a to your spouses pension pot.

Then when she/he retires, she/he will be able to take 25% of their pot tax free, and the remaining 75% at their marginal rate. Depending on their state pension entitlement, some or all of this could be within their personal allowance, so could be 0% taxed.

This is all the sort of stuff that a good IFA will sort out for you. And no, I'm not an IFA.

If you don't trust your spouse then you're probably already oppsed.

[Doctor Gollum]

Would it be fair to say that a pot of £500k would sustain an income of £39k then 

A million pound pot may not be feasible to achieve, half would be within reach...

Too many if's and but's for a full answer, but...

Assuming you plan to retire at 67/68, and will have a full state pension (£12.5K ish), and you draw down 4% of your pot p/a then...

State pension = £12.5K
4% of £500K = £5K TFLS + £15K before tax @ 20%

So your 'take home' would be roughly £29.5K, which is equivalent to a working salary of about £36K.

I'd say £39K take home is going to need a pot size of more like £750-800K. Otherwise you're going to require a drawdown rate way above a 'safe' 4%, and there is a risk your pot could be exhausted before you climb the curtain to the choir invisible. Up to you if you want to take that risk though.

Dad died at 70 from heart failure and undiagnosed lung cancer and Mum is ticking her way to 80 this year... I work in the 7th highest cancer risk rated industry so not betting on longevity 

[LC0112G]

At least £1m as far as I can tell. But it depends on what life style you want, what bills you have etc.

A safe withdrawal rate on a pot is about 3.5-4%, rising by inflation, so likely the max you'd want on there is about £1.5m (in today's money). This would allow you to sustain c£50k withdrawals for life after taking the maximum tax free cash of £298k. Much above that and you're paying 40% tax on the money on the way out. Which still might be a good deal over all but it makes having to lock the money up until 58/59 much less attractive than it would be otherwise.

This is roughly where I'm hoping to be by 58 but a lot has to go right (and keep going right) to make it happen 

That said I would personally always keep putting in enough to get the employer match as investment returns aren't guaranteed and an instant 100% uplift in your money is the best you'll see.

I was reading some suggestions that spreading the tax free amount and not taking it as a lump sum can work better. Eg take 30k year and top up tax free by 20k or similar. To avoid the 40% tax.

Either way I still need way more than I have now!

It's swings and roundabouts.

You can either take the entire 25% up front, an then pay tax on the remaining 75% as and when you withdraw it.

Or you can cash in small 'chunks' of your pot, and take 25% of that 'chunk' tax free and 75% taxable.

The upshot is basically the same - by the time the pot is exhausted you will have paid tax on 75% of the pot.

I quite like the idea of crystallising (basically cashing in) £60K per year. You can then take £15K (25%) tax free, pay 0% tax on the first £12.5K, and 20% tax on the remining £32.5K. The effective tax rate is therefore less than 15%. By the time you take national insurance and other tax deductions into account, that's effectively the same take home 'pay' as a working salary of £80K. When your state pension kicks in at 67/68 reduce the amount you crystallise by your SP amount and continue.

The above strategy is a higher risk than some, and your initial pot will probably need to be north of £1M to sustain it.

This is my current plan. With annuity as a backup, as I like the idea of a fixed income and reliability.

But to get a 60k income and retire at say 50. I think I will need more like £1.75m?

I'm already more than a decade ahead of you, so retiring at 50 is well in the rear view mirror for me. However, I really enjoy my job, so I'll continue doing it whilst I can.

Beware of planning to retire at 50. With a few exceptions the minimum age at which you can access your SIPP funds is currently 55, and that will rise to 57 in 2028. So you will need to fund any retirement between the ages of 50 and 55/57 using something other than your pension pots.

And yes, £60K p/a drawdown at 4% means a pot size of >£1.5M.

[tunnie]

At least £1m as far as I can tell. But it depends on what life style you want, what bills you have etc.

A safe withdrawal rate on a pot is about 3.5-4%, rising by inflation, so likely the max you'd want on there is about £1.5m (in today's money). This would allow you to sustain c£50k withdrawals for life after taking the maximum tax free cash of £298k. Much above that and you're paying 40% tax on the money on the way out. Which still might be a good deal over all but it makes having to lock the money up until 58/59 much less attractive than it would be otherwise.

This is roughly where I'm hoping to be by 58 but a lot has to go right (and keep going right) to make it happen 

That said I would personally always keep putting in enough to get the employer match as investment returns aren't guaranteed and an instant 100% uplift in your money is the best you'll see.

I was reading some suggestions that spreading the tax free amount and not taking it as a lump sum can work better. Eg take 30k year and top up tax free by 20k or similar. To avoid the 40% tax.

Either way I still need way more than I have now!

It's swings and roundabouts.

You can either take the entire 25% up front, an then pay tax on the remaining 75% as and when you withdraw it.

Or you can cash in small 'chunks' of your pot, and take 25% of that 'chunk' tax free and 75% taxable.

The upshot is basically the same - by the time the pot is exhausted you will have paid tax on 75% of the pot.

I quite like the idea of crystallising (basically cashing in) £60K per year. You can then take £15K (25%) tax free, pay 0% tax on the first £12.5K, and 20% tax on the remining £32.5K. The effective tax rate is therefore less than 15%. By the time you take national insurance and other tax deductions into account, that's effectively the same take home 'pay' as a working salary of £80K. When your state pension kicks in at 67/68 reduce the amount you crystallise by your SP amount and continue.

The above strategy is a higher risk than some, and your initial pot will probably need to be north of £1M to sustain it.

This is my current plan. With annuity as a backup, as I like the idea of a fixed income and reliability.

But to get a 60k income and retire at say 50. I think I will need more like £1.75m?

I'm already more than a decade ahead of you, so retiring at 50 is well in the rear view mirror for me. However, I really enjoy my job, so I'll continue doing it whilst I can.

Beware of planning to retire at 50. With a few exceptions the minimum age at which you can access your SIPP funds is currently 55, and that will rise to 57 in 2028. So you will need to fund any retirement between the ages of 50 and 55/57 using something other than your pension pots.

And yes, £60K p/a drawdown at 4% means a pot size of >£1.5M.

Ah yes forgot about the age limit. Someone I work with retired recently and I think it was just because he was allowed to draw it down.

[STEMO]

Have you considered the fact that, if all of you retire at 55/57, thus depriving the government of tens of thousands of pounds in revenue, benefit claimants may suffer. You callous bastards.

[Doctor Gollum]

Have you considered the fact that, if all of you retire at 55/57, thus depriving the government of tens of thousands of pounds in revenue, benefit claimants may suffer. You callous bastards.

Every cloud...

[tunnie]

I’m surprised you’ve not gone EV on sacrifice. It’s one of the best tax avoidance things around as far as I can tell. With the benefit of cheap hassle free motoring.

For the avoidance of doubt, as a bit bored of those that get an EV and becoming evangelists, much like vegans...

AN EV DOESN'T CURRENT WORK FOR US

Doesn't matter how expensive or cheap it is, if it doesn't work, it's a waste of money. Simples.

More as tax avoidance though, not the car!!! My push to get one was not the car. Not the running costs, not the service bit. Not actually anything relating to the car itself.

My main reason was to pull money away from the tax threshold. The savings in tax was key, in combination with pension contributions. All to max out what can be kept away from the government ludicrous stealth tax band.

If I had not ordered one it would have been more of a waste of money, as the option to keep the cash instead was far more depressing and gave far to much to the tax away.

I will add that you mentioned minimum wage. So guess you are pushing it down super low.

I think with our scheme some people have taken the car, then increased pension contributions.

The car scheme does check national wage, but pension deductions do not.

So it’s just a method to push it down and save more tax 

[Doctor Gollum]

That may be true of your work scheme.

My work evening scheme limits the pool of available ev options based on basic pay to prevent dropping below minimum living wage.
Likewise my work pension contributions are capped at 5% of basic pay because of my wage. Company puts in 11% though so not unreasonable.

Allowances and duty pay and about 40% to my income but would be nice if the various schemes and pension contributions reflected the affordability at the true level rather than the base...