Is this doable (pension related)

[Colonel Cupcake]

For various reasons I have a very small pension pot. I am 55 but want to stop working at 60.

I would be able live on 12 grand a year and if I take that out of my pension, it would last until I reach 67 and the state pension kicks in. I assume I would not be paying any tax on my private pension as 12 grand is below my personal tax allowance.

Is there anything wrong with my thinking here?

[bitchstewie]

That would be my understanding and I'd be interested to know if there are situations where that isn't the case if there is no other income.

Don't forget some of the pension may able to be taken tax free regardless.

[TwigtheWonderkid]

Take as much out as you can tax free from 60, even if you don't need it. Anything you're left with at 67 will limit the amount you can get at without paying tax, given that by then you'll probably be getting £11K ish a year in state pension that eats into your personal allowance.

I'd be taking out £16,760 a year, £12570 tax free allowance plus £4190 from the tax free part of your pension. If you only need £12K, stick £4760 in an account paying as high an interest rate as you can find. You probably won't need an ISA, as you can earn £6000 interest tax free anyway.

[leef44]

TwigtheWonderkid said:

Take as much out as you can tax free from 60, even if you don't need it. Anything you're left with at 67 will limit the amount you can get at without paying tax, given that by then you'll probably be getting £11K ish a year in state pension that eats into your personal allowance.

I'd be taking out £16,760 a year, £12570 tax free allowance plus £4190 from the tax free part of your pension. If you only need £12K, stick £4760 in an account paying as high an interest rate as you can find. You probably won't need an ISA, as you can earn £6000 interest tax free anyway.

From a tax perspective, this is good advice.

My concern would be that pensions investments can go up or down in value so there is an exposure risk if the OP can just about manage £12k p.a. from the current pension up to pension age. There is still time for governments to increase the state pension age (probably no less than 10 years in advance).

I would be inclined to work a bit longer to ensure there is a contingency fund in case things change which are outside of your control.

[xeny]

Colonel Cupcake said:

For various reasons I have a very small pension pot. I am 55 but want to stop working at 60.

I would be able live on 12 grand a year and if I take that out of my pension, it would last until I reach 67 and the state pension kicks in. I assume I would not be paying any tax on my private pension as 12 grand is below my personal tax allowance.

Is there anything wrong with my thinking here?

Given where inflation is, are you likely to be able to still live on £12,000/year when you reach 60?

[PositronicRay]

leef44 said:

TwigtheWonderkid said:

Take as much out as you can tax free from 60, even if you don't need it. Anything you're left with at 67 will limit the amount you can get at without paying tax, given that by then you'll probably be getting £11K ish a year in state pension that eats into your personal allowance.

I'd be taking out £16,760 a year, £12570 tax free allowance plus £4190 from the tax free part of your pension. If you only need £12K, stick £4760 in an account paying as high an interest rate as you can find. You probably won't need an ISA, as you can earn £6000 interest tax free anyway.

From a tax perspective, this is good advice.

My concern would be that pensions investments can go up or down in value so there is an exposure risk if the OP can just about manage £12k p.a. from the current pension up to pension age. There is still time for governments to increase the state pension age (probably no less than 10 years in advance).

I would be inclined to work a bit longer to ensure there is a contingency fund in case things change which are outside of your control.

Work towards it, spend the next couple of yrs setting out what need.
Not necessary to commit just now. If things get tight you can always take some part time or temporary work.

Edited by PositronicRay on Friday 7th July 16:07

[Colonel Cupcake]

xeny said:

Colonel Cupcake said:

For various reasons I have a very small pension pot. I am 55 but want to stop working at 60.

I would be able live on 12 grand a year and if I take that out of my pension, it would last until I reach 67 and the state pension kicks in. I assume I would not be paying any tax on my private pension as 12 grand is below my personal tax allowance.

Is there anything wrong with my thinking here?

Given where inflation is, are you likely to be able to still live on £12,000/year when you reach 60?

It could well be tight, especially at the latter end but I am a naturally tight Yorkshireman.

I still have 5 years of contributions, dividend payments on the pot and any growth that may occur in the funds invested. I know it can go the other way but none of us can fortell the future and if things are that bad I don't have to give up work entirely.