Author Topic: Balancing pensions/SIPPs (etc) and ISAs (etc)  (Read 16267 times)

vand

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Re: Balancing pensions/SIPPs (etc) and ISAs (etc)
« Reply #50 on: April 24, 2019, 04:58:20 AM »
Indeed.. in the current monetary paradigm its difficult to see how interest rates and therefore annuities will rise to anything like the level where the LTA limit would then put you into the the 40% tax bracket, especially with TFLS and flexible drawdown rules. Again, it is probably not by accident that the LTA is set at level it currently is.. you design a set of rules that works for people within 2.5 standard deviations of the bell curve mean, not the outliers..


londonbanker

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Re: Balancing pensions/SIPPs (etc) and ISAs (etc)
« Reply #51 on: May 07, 2019, 05:17:24 PM »
WoW lovely thread. Good to see fellow UK residents on the forum. Posting to follow this thread w interest.
I am getting myself to retire in about 3 years at 42... maxed my and wife pension contributions and ISAs (JISAs too) to make the most of the tax incentives and everything else is split across taxables accounts between the wife and I to minimise taxes on dividends.

One thing I would add regarding comments warning against over-contributing into a DC pension, is that it is a great way pass on an inheritance tax free... might not apply to everybody, but pensions have become an integral part of estate planning and transmission after the 2016 budget.

UK Dancer

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Re: Balancing pensions/SIPPs (etc) and ISAs (etc)
« Reply #52 on: May 08, 2019, 04:41:35 AM »
I didn't know this about DC pensions! I don't currently have anyone but my spouse as a beneficiary who won't get taxed anyway, but this is massively useful should I have a different situation in the future!

So from this inheritance point of view, the best thing to do is take all your retirement income from ISAs, State Pension and other non-DC-pension investments, with the knowledge that the DC pension is there if you need it but if not, it'll most likely pass tax-free or at their normal income tax rate to your beneficiaries?

londonbanker

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Re: Balancing pensions/SIPPs (etc) and ISAs (etc)
« Reply #53 on: May 09, 2019, 03:59:00 PM »


So from this inheritance point of view, the best thing to do is take all your retirement income from ISAs, State Pension and other non-DC-pension investments, with the knowledge that the DC pension is there if you need it but if not, it'll most likely pass tax-free or at their normal income tax rate to your beneficiaries?

It will be passed on tax free as long as they put that amount on their pension account too (eg SIPP or other pension wrapper) - regardless of the annual contribution - though I assume up to the lifetime pension amount - whatever that will be at the time.
Obviously, like everything else when it comes to government, they might change the rules of the game along the way....

PhilB

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Re: Balancing pensions/SIPPs (etc) and ISAs (etc)
« Reply #54 on: May 10, 2019, 12:58:58 AM »


So from this inheritance point of view, the best thing to do is take all your retirement income from ISAs, State Pension and other non-DC-pension investments, with the knowledge that the DC pension is there if you need it but if not, it'll most likely pass tax-free or at their normal income tax rate to your beneficiaries?

It will be passed on tax free as long as they put that amount on their pension account too (eg SIPP or other pension wrapper) - regardless of the annual contribution - though I assume up to the lifetime pension amount - whatever that will be at the time.
Obviously, like everything else when it comes to government, they might change the rules of the game along the way....
Inherited DC pensions are completely separate and standalone.  They don't count towards the inheritor's own LTA (although there may be an LTA charge if the person who died was over the LTA).

joseph_uk_6

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Re: Balancing pensions/SIPPs (etc) and ISAs (etc)
« Reply #55 on: July 12, 2019, 05:10:22 AM »
Just want to say thanks for all the quality input in this thread.

I'm just starting to plan for retirement and FIRE (aged 35 currently) and the SIIP vs ISA was giving me a headache. Glad to see it's not clear cut! :)

My concern is that the SIPP is somewhat controlled by the government. The maximum allowance + date you can retire. But then I'm also worried that .gov may kill the higher rate relief for SIPPS.

Still unsure whether to smash the SIPP in the short term or split the difference.


londonbanker

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Re: Balancing pensions/SIPPs (etc) and ISAs (etc)
« Reply #56 on: July 12, 2019, 12:53:16 PM »
It’s not clear cut as nobody can see the future. It’s just a case of more flexibility and more tax vs. little flexibility, subject to governments whim and big tax relief...

djr8369

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Re: Balancing pensions/SIPPs (etc) and ISAs (etc)
« Reply #57 on: September 11, 2019, 11:54:23 AM »
A great thread and a relief to find it as this is something that has been bugging me due to the American slant of FIRE advice.

I'm 36 and in theory should be able to FIRE around 46 but expecting that to be 50ish assuming we have kids. So lets say I might need to live of my ISA for around 10 years, I've been thinking about around a 50:50 split between ISA and DC/SIPP with a modest military pension at 65 and possibply some state pension.

Living off 50% of my total pot for 10 years is scary though due to the vastly increased sequence of returns risk although I could offset that to some extent by building a cash buffer in the couple of years run in to FIRE. Decisions, decisions!

PhilB

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Re: Balancing pensions/SIPPs (etc) and ISAs (etc)
« Reply #58 on: September 11, 2019, 11:55:10 PM »
I'm in a similar position of FIREing at 52 with DB and state pensions coming along later.  For me it works much better to think in terms of two separate pots - a 'perpetuity' pot, handled to give an income at your desired withdrawal rate over your whole retirement, and a bridging pot specifically designed to be spent down over the gap. 
As an example, if your desired income was £20k pa, half that was covered by DB/SP and you had a 15 year gap to fill and used a 3.33% withdrawal rate then you'd be looking for £300k in pot 1 to give you £10k drawdown, plus £150k in pot 2 to give you the other £10k for the first 15 years.  My personal slant is to invest pot 2 much more cautiously, but that's just me.

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Re: Balancing pensions/SIPPs (etc) and ISAs (etc)
« Reply #59 on: July 25, 2020, 08:32:09 AM »
Since this thread began this Monevator series was created on this very topic. This is worth adding here on an important UK subject.

https://monevator.com/tag/ISA-pension-split-series/

@PhilB - this would probably be a very good thread to add your main pots of joy logic. I didn’t want to do this on your behalf though if you didn’t want that in here. Just let me know if not and I’ll remove these couple of sentences.