I'm 66 next month and have resigned my CA job effective 31-12-25. Apart from feeling now is the time to be fully retired the project I've been working on is contracting and if I'd stayed on there would have been a redundancy situation.
While working there I've paid into a Nest pension. The amount of income it would buy wouldn't make it worth buying an annuity but it's enough for a few trips to winter sunshine.
As I understand it I can take 25% tax free as a lump sum and the rest is taxed as income. I'm hovering around the 40% bracket in the current tax year but will probably be below it in 26/27.
I'll take my chances on Ms Reeves messing with lump sums in her budget; if she changes things I'm thinking it will be targeted at far larger sums than mine.
So if I'm right about the 25% /75% split as above are there other choices?
Obviously I'm looking for opinions/options and not advice.
Might have a word with Pension Wise too.
|
I think you may have missed a trick by resigning, rather than wait for redundancy.
I've taken redundancy once and it was very lucrative. Conversely, I've resigned from a couple of jobs and walked away with nothing, other than a small pension from one.
|
>> I think you may have missed a trick by resigning, rather than wait for redundancy.
>> I've taken redundancy once and it was very lucrative
Yeah, I would hang in there too for that very reason. It might not be very lucrative in your case, but would surely pay for a holiday?
|
Although CA presents as a national organisation with a single logo etc in practice it's a confederation of local charities each of which employs its own staff.
I resigned from the local West Northants one in August 24 to go back to a work type I was more comfortable with at a CA on the South Coast. They've twigged that as the role is a perfect fit for 100% WFH they can get a much better choice of candidates if they recruit nationally. But it was a new employer so back to square one so far as service for redundancy and employment protection are concerned.
I don't think I'd get much after only 14 months and I'd already said I was retiring before the reduction in numbers was concerned.
I'm where I am age wise, have a Civil Service pension and we;re mortgage free. Mrs B also has both occupational and State Pension. Both inherited reasonable sums from our Mothers.
The others are mostly much younger and no doubt have mortgages or rent to pay and mouths to feed, so pushing on while they were left hanging and potentially applying for other jobs wasn't fair. They were able to finesse those folks keeping their existing hours once my 24 were out of the field.
Whenever redundancy has been in the air at CA, I was in a redundancy cohort in 2019, I'm also aware that every £1 they give me for redundancy is £1 that can't go towards the organisation's objective.
|
Think it very much depends on your short term outgoings, and frankly your long term health prospects for you both* and your longer term financial obligations. If you have a mortgage left for example, then it makes sense to take your 25% and pay it off. Any other loans ditto. If you have building/improvement/spending plans, use your 25%, if not plan longer term.
In my example, I retired early (age 55) so had a hefty chunk of mortgage left. Took my 25% and paid it off.
*statistically your spouse should out live you, so your planning should include that.
|
Your suggestion that you might use Pensionwise for a telephone call is a good one. I found their service mainly confirmed what I already knew but had a couple of points I might have missed or misunderstood.
You might want to look at still contributing to your pension and drawing income at the same time. But that needs professional advice, not online musings such as mine, maybe starting with Pensionwise.
Finally, on a tangent, if your wife is a non-taxpayer, and you pay basic tax, she can transfer part of her allowance to you. Not worth much but it all helps.
|
Judging from the intellectual capacity you display in your many posts I think you will find that 'pensionwise' will not tell you anything much you didn't know already. I think it is mainly to help simpletons to avoid scams. At 75 I have been through much of the pension stuff, successfully withdrawing the 25% we are allowed as a tax free lump sum and keeping the remaining 75% invested; they call it 'drawdown', which I think means that although its value should, subject to the vagaries of the stock market, increase over time, every time you tap into it for (draw down) some additional moolah, this will be taxed at your highest rate. The literature these financial outfits produce to explain this sometimes seems to be deliberately obfuscating.
Incidentally, I am currently fighting a battle with the Pru on behalf of Mrs F; for some inexplicable reason they have not only ignored our clear simple instructions and accessed her pension on the wrong date but also 'taxed' her 25% tax free lump sum!
|
>> Judging from the intellectual capacity you display in your many posts I think you will
>> find that 'pensionwise' will not tell you anything much you didn't know already. I think
>> it is mainly to help simpletons to avoid scams.
I don't know if it still is but before/after the pandemic Pension Wise was contracted to Citizens Advice and I knew several of the advisors.
I suspect you're right that I won't learn much but it might be worth a punt in case they disclose something I'd have missed. Having worked on benefits since 2015 I'm still finding new stuff every month!!
|
Some other thoughts:
Is this a final salary scheme where a tax free drawdown may only be made before the pension kicks in, or a pension fund you could draw down on at any time.
Do you need the fairly small amount of cash the 25% would give, or do you have the income or savings to pay for the winter sun anyway.
How is your health? Personal experience - I chose to take the 25% drawdown from one pension as at one point my health was seriously poor - it seemed a good deal to get the cash now rather than hope I survived for 15+ years to get the money in bits.
If you don’t immediately need the money what would you do with it - buy an ISA to ensure it grows tax free, buy a new kitchen, simply indulge yourself.
It seems unlikely the budget in a few days will increase the opportunity for tax free drawdown, but may restrict it - possibly for larger amounts or possibly restrict tax relief to basic rate only.
Last edited by: Terry on Mon 24 Nov 25 at 12:11
|
>> Is this a final salary scheme where a tax free drawdown may only be made
>> before the pension kicks in, or a pension fund you could draw down on at
>> any time.
It's a DC scheme I've been in for around 8 years with employer contributing.
We're both in OK health though mine is better than Mrs B's.
We've already used ISA allowances for this year.
Have income/savings but I'm seeing this cash, around £10k, as a bonus; trying to work out the best way to access it while minimising tax liability.
|
My understanding is that for a DC pension the tax free drawdown can be taken at any time in one lump or by instalments as tax and personal circumstances dictate.
It seems you have no need for an immediate cash sum.
If taken this tax year you will need to wait until at least next year to invest it tax free in another ISA. If left in the pension fund it should grow tax free.
The risk of leaving it in the pension fund is that Rachel will take away the 25% tax free concession. None of us will know for certain until Wednesday!! Your call.
Choice may be more emotional than rational. An unexpected £10k is an opportunity to “treat” yourself when previous financial behaviours may have been more cautious or restrained.
£10k seems unlikely to materially change long term personal circumstances. The future tax risk at worst is £2k assuming that tax free drawdown is completely withdrawn.
I have found, a few years into the retirement game, the importance of money has receded - being tolerably financially comfortable means I can simply afford that which I reasonably desire.
|
>>I have found, a few years into the retirement game, the importance of money has receded - being tolerably financially comfortable means I can simply afford that which I reasonably desire.
Money doesn't matter to me until I run out. In my case, that could happen if there is too much inflation. A few years of 1970's/early 80's inflation would be very painful, devastating savings and slashing the real value of my pensions which have less than 5% inflation protection on average.
If your government pension is fully inflation proof that's a different matter. Assuming it stays that way.
|
You can leave it uncrystallised and take out sums as you wish, know as UFPLS (Uncrystallised Funds Pension Lump Sum). If you do this then each of each withdrawal 25% is tax free and the rest taxed at your marginal rate. The residue remains uncrystallised so in theory you could still get an annuity with it.
Or you can put the whole sum into drawdown and take your 25% of the lot immediately if you don't want to leave it in to grow. Until you make drawings on the rest it remains invested, when you do it is taxed at your marginal rate.
I'd be inclined to grab the lump sum but I doubt if Reeves will change it with immediate effect if she does at all. You can leave the rest in the drawdown pot until you drop out of higher rate tax.
Consider also if you want to defer your state pension if it's due. It increases if you defer it AIUI and it might keep you under the higher rate threshold until you have extracted your DC pension.
E&OE. These things change faster than I can keep up.
|
I'd started taking tax free bits when SWMBO was still working, just enough for our needs. Bit last year when RR was reportedly eyeing it up we both cleared all the tax free out of our pensions. Insufficient ISA headroom left to put it all there but we have done significant home improvements and holidayed and new cars and thereby easily soaked it up.
I don't know why you'd leave it there really, though as above I doubt any change would be immediate (though it does take some weeks to get it out, in my experience). You can always put it somewhere short term until the new ISA year starts and not lose too much on it.
You get £1000 unearned income tax free each each year which goes quite a long way. Or just stick it into premium bonds which are fairly dire long term but you may just strike lucky!! :-)
|
>>Or just stick it into premium bonds which are fairly dire long term but you may just strike lucky!! :-)
I've found them to be a reasonable investment (after ISAs). I believe the current 'return' is 3.6%, which, as it's tax-free, is the equivalent to 4.5% tax paid.
|
"I believe the current 'return' is 3.6%"
Arithmetically perhaps but some holdings will return nothing. You really need to look at the median return
The median annual return on a £10,000 holding is somewhere around 3.00%
I have a £1 premium bond given to me in 1959. It has never won me anything !
|
SWMBO's already above 10% in the 8 months of this tax year.
(I might keep her a bit longer)
|
>>I have a £1 premium bond given to me in 1959. It has never won
>> me anything !
Me too...
|
|
Invested at 5% compound that would now be worth £26.63
|
My Father gave me one shilling and sixpence weekly pocket money in the sixties but retained the sixpence for savings which he invested in National Savings Certificates.
I think I cashed them all in as they matured collecting enough for a ten yo Mini in the early eighties.
I've recently asked NS&I to check nothing got lost. I had a rubbish/stuff of value mix up on one of many HMO/bedsit moves in early eighties and not 100% sure everything was retrieved from the bin.
Last edited by: Bromptonaut on Mon 24 Nov 25 at 21:42
|
Between us we have a few hundred Premium Bonds dating from 1960 to about early 1970s
They used to provide regular £10, the odd £25 and on one accasion £50.
I cannot recollect seeing a penny in the last 25 years.
For younger readers
1970
£100 take home pay in a month was well above the average take home pay.
£10+ would pay for your monthly heating in a small 3 bedder,
£5-£7 would be the weekly food shop for a couple,
£2.50 for 10 gallons (45 litres) of 4*
Last edited by: Falkirk Bairn on Tue 25 Nov 25 at 10:18
|
Not all bad news.
A few months ago I received a letter from Nationwide telling me I had some money in an account I had completely forgotten about.
They had tracked me down after more than 30 years and several house moves.
The amount in the was ~£500. In the intervening 30 years the interest was measured in pence!
Not a fortune - a weekend away perhaps - but I was thoroughly impressed. However I do wonder how much is never claimed or tracked down and what happens to it.
|
>> I do wonder how much is never claimed or tracked down and what happens to
>> it.
AI Answer
It is estimated that around £82 billion is left in lost and dormant accounts in the UK, encompassing bank accounts, pensions, shares, and investments. While a significant portion is in pensions (£31.1 billion), there is an estimated £4.5 billion in dormant bank and building society accounts. The funds in these dormant accounts can be reclaimed by their owners, but a portion is also used for community and social initiatives.
I had a dormant British airways pension. They sent me a large sized cheque 35 years later, with a lovely old speedbird logo on it, drawn on the Bank of New York, for £7.52p
I framed it and put it in my feng shui wealth corner.
Last edited by: Zero on Tue 25 Nov 25 at 11:04
|
Defined Cont Pension Options - bathtub tom
