[AndyMD]

My wife was awarded a pension as part of divorce from her 'trial run' husband. That was 18 years ago and she took the 25% at 55. What are her options now (7 years later) and the 25% has grown back in the pot.

If she takes a regular amount from it, I take it that it's taxable? We don't need the money at the moment. Is there a way of transferring it and then drawing it down in 5 years time without paying tax? Or any other clever way?

Don't want to break any laws etc. so nothing moody!! But unfortunately we are both a little head in the sand over pensions as she is 6 years away from state pensions and I'm 10.

Cheers

[isleaiw1]

Short answer - no, once you have taken the 25% then anything thereafter is taxable, so if you dont need it dont take it....

And of course if you dont need it then dont take the 25% and leave it invested and use it to be flexible about what you do take and pay tax on later...

(suddenly getting very knowledgeable about pensions, who'd have guessed he was 60 soon).

Of course if its a DB scheme I dont think you can take the 25% without starting to take the monthly pension - the only benefit of DC scheme is flexibility - oh and that if there is anything left when you die then its part of your estate whereas a DB scheme dies with you / your spouse (assuming you dont have dependent kids when the last one of those dies)

[Pond]

Originally Posted by isleaiw1

Short answer - no, once you have taken the 25% then anything thereafter is taxable, so if you dont need it dont take it....

And of course if you dont need it then dont take the 25% and leave it invested and use it to be flexible about what you do take and pay tax on later...

(suddenly getting very knowledgeable about pensions, who'd have guessed he was 60 soon).

Of course if its a DB scheme I dont think you can take the 25% without starting to take the monthly pension - the only benefit of DC scheme is flexibility - oh and that if there is anything left when you die then its part of your estate whereas a DB scheme dies with you / your spouse (assuming you dont have dependent kids when the last one of those dies)

Pensions are now becoming foremost in my mind too (57 this year). My main pension has no 25% available (still don't quite know why) but the other two do (both were from 35 years ago. One was the opting out of SERPS one).

I am starting to look at 'drawdowns' for all as I don't want £25 a month for the next 300 years.

As to the original post; I was under the impression that anything other than the 25% is included in 'taxable income'. So if you drew £12,000 a year from a pension as your only income, it would still be tax free (as free pay)?

[isleaiw1]

Originally Posted by Pond

Pensions are now becoming foremost in my mind too (57 this year). My main pension has no 25% available (still don't quite know why) but the other two do (both were from 35 years ago. One was the opting out of SERPS one).

I am starting to look at 'drawdowns' for all as I don't want £25 a month for the next 300 years.

As to the original post; I was under the impression that anything other than the 25% is included in 'taxable income'. So if you drew £12,000 a year from a pension as your only income, it would still be tax free (as free pay)?

correct, pension is taxable income so as long as its your only income you have 12500 ish tax free to draw.

57, youngster!

[Pond]

Originally Posted by isleaiw1

57, youngster!

The old saying "you are as young as you feel". I feel about 80 most days. I have had a VERY hard life.

[isleaiw1]

Originally Posted by Pond

The old saying "you are as young as you feel". I feel about 80 most days. I have had a VERY hard life.

I commute into London 3 days a week. 9 years ago when I started I remember calling my (now late) wife and saying something along the lines of "commuting is crap, but I'm glad I am not one of the oldies who nearly get barged out of the way as the train unloads and the stampede down the platform starts"

well now I am nine years older (nearly) and was 51 then... and know how they feel, especially as my office has moved from a 5 min stroll to a 35 min yomp away!

Roll on 65!

PS as old as you feel, 57 then

[AndyMD]

Thanks all, guess there's only two guarantees in life, death and taxes.

Thanks again

[Scoobyd]

Just some general pensions/retirement thoughts from me...

Leaving it until your 50s and 60s to start paying attention to your pensions could see you arriving rather late to the party... earlier the better!

Also, try not to view retirement as pensions but rather your assets overall. It doesn't matter where the money comes from, pensions just happen to be one (and usually the best) of your tools in the bag to build wealth for your future lifestyle.

Another big one... don't just focus on being able to afford to retire. Of course it's vital, but just as vital is being ready to retire. Have a plan for what life looks like beyond work, once that purpose you've had for decades is no longer there. How will you fill your time, what do you want to do with the rest of your life? I see people with plenty of money, but no plan. And the mental regression post work can be startling.

You also have to be able to flick the psychological switch and move from the saving part of your life to the spending part. You'd be amazed how many struggle with this. Decades of saving as you try to accumulate money best you can, to then switching to turning on the spending tap as you go and live life to the full. Loads of people are genuinely scared to spend their money in retirement for fear of running out one day. And not knowing how much they can safely spend without risk of that happening. So they end up being too cautious with it.

No point working and saving all your life if you don't get to one day enjoy the fruits of it. Life is for living, it's not a rehearsal!

[Pond]

Originally Posted by Scoobyd

Another big one... don't just focus on being able to afford to retire. Of course it's vital, but just as vital is being ready to retire. Have a plan for what life looks like beyond work, once that purpose you've had for decades is no longer there. How will you fill your time, what do you want to do with the rest of your life? I see people with plenty of money, but no plan. And the mental regression post work can be startling.

You also have to be able to flick the psychological switch and move from the saving part of your life to the spending part. You'd be amazed how many struggle with this. Decades of saving as you try to accumulate money best you can, to then switching to turning on the spending tap as you go and live life to the full. Loads of people are genuinely scared to spend their money in retirement for fear of running out one day. And not knowing how much they can safely spend without risk of that happening. So they end up being too cautious with it.

One of the best posts I have ever seen on t'internet; ever.

You could be describing me to a tee.

In 2024 though I don't see many having 'saved' all their life, then being scared of 'spending'.

Apart from me, most people I know are very good at the 'spending' bit, but not so good at the 'saving' part.

The 'live for today' attitude seems to have been prevalent for many years. Then when it comes to tomorrow the attitude IME is 'the Government will pick up the tab'. If that's the case then we are all going to die relatively poor.

[Techno 9000]

Some spend and 'live for today' but other, more cautious, people who are inveterate savers do struggle to switch their mind to spending. I'm in the latter camp, my wife even more so.

With five weeks to retirement it's time to move the mindset.

Still full on at work, perhaps more so given the impending handover of a role I've done for many years.

[isleaiw1]

Originally Posted by Techno 9000

Some spend and 'live for today' but other, more cautious, people who are inveterate savers do struggle to switch their mind to spending. I'm in the latter camp, my wife even more so.

With five weeks to retirement it's time to move the mindset.

Still full on at work, perhaps more so given the impending handover of a role I've done for many years.

Good luck with the change, let us know how it goes.

I'm 5 years out (or 7 if you listen to the govt) but planning moving to a 4 day week next year, and already looking at team structure to try and work out a succession plan. If we get to 4 years from now and they are ready I'll drop off a bit early or go to three days or something...

Just one point for Scoobyd, its much harder to save for retirement when you have kids at home and uni, learning to drive etc. I definitely didnt do enough when I was in my 40s but started trying harder in my 50s and now reckon I'll have rescued it - but then I have effectively been working a paid 4 day week for a while now as I used the 5th days pay to add to pension. Perhaps not the text book way but given my circumstances now and when younger, it worked for me... I think, I'll tell you better in a few years...

Its the plan for my time that worries me, my other half is 2 years younger and def not ready to retire so I may do some voluntary stuff to keep my brain active...

[JustChris]

Originally Posted by Techno 9000

Some spend and 'live for today' but other, more cautious, people who are inveterate savers do struggle to switch their mind to spending. I'm in the latter camp, my wife even more so.

With five weeks to retirement it's time to move the mindset.

Still full on at work, perhaps more so given the impending handover of a role I've done for many years.

5 weeks oh yes!!! Congratulations, we need a weekly countdown

[Hartside]

Originally Posted by Scoobyd

Just some general pensions/retirement thoughts from me...


You also have to be able to flick the psychological switch and move from the saving part of your life to the spending part. You'd be amazed how many struggle with this. Decades of saving as you try to accumulate money best you can, to then switching to turning on the spending tap as you go and live life to the full. Loads of people are genuinely scared to spend their money in retirement for fear of running out one day. And not knowing how much they can safely spend without risk of that happening. So they end up being too cautious with it.

No point working and saving all your life if you don't get to one day enjoy the fruits of it. Life is for living, it's not a rehearsal!

You absolutely hit the nail on the head for me with this. It’s a conversation I’ve been having with a Dutch colleague and my wife in the past few weeks. Semi retired in 2018 and I’m too protective of what I’ve saved. Both have been saying I need to let go a lot more. I’m in the process of buying a new car and feel guilty at spending too much, wifey and Dutch colleague are both talking sense into me about this and other spends. As my wife keeps saying, there are no pockets in a shroud!

[Pond]

Originally Posted by Hartside

You absolutely hit the nail on the head for me with this. It’s a conversation I’ve been having with a Dutch colleague and my wife in the past few weeks. Semi retired in 2018 and I’m too protective of what I’ve saved. Both have been saying I need to let go a lot more. I’m in the process of buying a new car and feel guilty at spending too much, wifey and Dutch colleague are both talking sense into me about this and other spends. As my wife keeps saying, there are no pockets in a shroud!

Similar here TBH. I have spent all of my adult life working hard just to pay the bills, as I have never been a big earner (my own fault).

Now, thanks to several factors, we have a significant amount of cash in the bank for the first time ever. I do find it difficult to spend money when I see the interest we are earning on this every month. Old habits die hard aswell.

Also for the last 15 years interest rates have been terrible for savers. In 2021 we were being paid 0.45%.
Finally they have reached a decent figure (we get 5.15% currently), so I am loathe to give that away for at least a while.

However, even being a cheapskate, there is a real 'feel good factor' of having accessible money. For the first time in my life I don't need to worry about money which helps me sleep at night. I did spend a lot of time in my 20s and 30s worrying about paying the mortgage every month.

[JD6]

When I look around at people close to me, there often seems to be a medical issue which happens at some point during their 70s which impacts their life and reduces the ability to travel. For a couple who do most things together, the risk in effect doubles. It does reinforce the point made here that making the switch to spending shouldn’t happen too late.

My (teacher) gf is building her SIPP over then next 8 years before she hits 60, when she can retire and take her DB pension. The rational thing to do would be to smooth out her retirement income until her state pension arrives using the SIPP, but I can see she’ll find that tricky. If she doesn’t get over that hurdle, she’ll be better off from 67, than she is from 60-67, which doesn’t seem sensible.

[AndyMD]

Originally Posted by Scoobyd

You also have to be able to flick the psychological switch and move from the saving part of your life to the spending part. You'd be amazed how many struggle with this. Decades of saving as you try to accumulate money best you can, to then switching to turning on the spending tap as you go and live life to the full. Loads of people are genuinely scared to spend their money in retirement for fear of running out one day. And not knowing how much they can safely spend without risk of that happening. So they end up being too cautious with it.

!

Thank you so much for this. I've never really had 'money' so to speak until recently. I've never had a credit card, bank loans (apart from mortgage), or any other debt, Lease most of my cars I've had and now I have a little bit of money (not talking dream car or house money - not even really dream watch money) due to parents sadly no longer being here, spending money genuinely causes me anxiety. Even booking holidays in better hotels than I have been able to afford breaks me out in a cold sweat!! Don't know why.

I know for the last 30+ years I've been paying into a pension but just thought I'd worry about that when I get the gold watch, but I do need to flick that switch.

[Pond]

Not a definitive overall financial snapshot, admittedly, but it's maybe worth noting;

In 2023 my private pension rose by 2% over the year. Limited access savings accounts are paying over 5% at the moment (although it probably won't last long). Even with tax that's a lot more.

[isleaiw1]

Originally Posted by Pond

Not a definitive overall financial snapshot, admittedly, but it's maybe worth noting;

In 2023 my private pension rose by 2% over the year. Limited access savings accounts are paying over 5% at the moment (although it probably won't last long). Even with tax that's a lot more.

I'd imagine in 2024 your pension pot will have peed all over the 5% that your cash savings are earning.

The best advice is of course to have an element of all three (remembering of course that what goes into your pension saves tax and NI which could be 62%o or a lot more if you manage to salary sacrifice down below an arbitrary cut off the govt apply to deprive you of things you would otherwise get given!)

I think my S&S ISA has gone up just under 10% since Jan and I've only paid in 2.5% of that...so the other 7.5% is growth... since Jan.

[Pond]

Originally Posted by isleaiw1

I'd imagine in 2024 your pension pot will have peed all over the 5% that your cash savings are earning.

The best advice is of course to have an element of all three (remembering of course that what goes into your pension saves tax and NI which could be 62%o or a lot more if you manage to salary sacrifice down below an arbitrary cut off the govt apply to deprive you of things you would otherwise get given!)

I think my S&S ISA has gone up just under 10% since Jan and I've only paid in 2.5% of that...so the other 7.5% is growth... since Jan.

Yes, admittedly the pensions do seem to be faring much better this year.
I think I worked out an average yearly growth of 8% over the past 30 years on mine.

[isleaiw1]

Originally Posted by Pond

Yes, admittedly the pensions do seem to be faring much better this year.
I think I worked out an average yearly growth of 8% over the past 30 years on mine.

I think that is what projections tell you and that is why time in the market is so critical (and you hope that there isnt a crash just before you retire). Lets hope Starmer doesnt mess it up for those of looking to retire in 4 or 5 years Might have to hang on until the election after if so!

[JD6]

Originally Posted by isleaiw1

I think that is what projections tell you and that is why time in the market is so critical (and you hope that there isnt a crash just before you retire). Lets hope Starmer doesnt mess it up for those of looking to retire in 4 or 5 years Might have to hang on until the election after if so!

These days, with drawdown rather than being forced to buy an annuity, timing is less critical than it was. I do wonder what Labour might do to dividend taxes though as they keep banging on about unearned income…

As someone who visits London from time to time, glad to hear you’re planning to work a few more years…

[isleaiw1]

Originally Posted by JD6

These days, with drawdown rather than being forced to buy an annuity, timing is less critical than it was. I do wonder what Labour might do to dividend taxes though as they keep banging on about unearned income…

As someone who visits London from time to time, glad to hear you’re planning to work a few more years…

Lets hope my boss is planning the same