Money in the bank or Pension
Discussion
As has been said previously, more information is needed.
One very easy option is to buy an annuity. With that sum he will be able to buy a level, single life one which would provide an income of over £100,000 per year. That would take him into the 60% tax bracket, so I would buy one which keeps him below that. With the rest buy a nice sports car!
Remember annuities don’t pay very well for IFAs, just the one off cost.
One very easy option is to buy an annuity. With that sum he will be able to buy a level, single life one which would provide an income of over £100,000 per year. That would take him into the 60% tax bracket, so I would buy one which keeps him below that. With the rest buy a nice sports car!
Remember annuities don’t pay very well for IFAs, just the one off cost.
Claret m said:
As has been said previously, more information is needed.
One very easy option is to buy an annuity. With that sum he will be able to buy a level, single life one which would provide an income of over £100,000 per year. That would take him into the 60% tax bracket, so I would buy one which keeps him below that. With the rest buy a nice sports car!
Remember annuities don’t pay very well for IFAs, just the one off cost.
What do you mean by a 60% tax bracket?One very easy option is to buy an annuity. With that sum he will be able to buy a level, single life one which would provide an income of over £100,000 per year. That would take him into the 60% tax bracket, so I would buy one which keeps him below that. With the rest buy a nice sports car!
Remember annuities don’t pay very well for IFAs, just the one off cost.
Surely he can go up to £125k per year and pay 40% with 45% over that?
NorthDave said:
What do you mean by a 60% tax bracket?
Surely he can go up to £125k per year and pay 40% with 45% over that?
Unfortunately not, for ever £2 over £100,000 you lose £1 of your personal allowance, so that has the effect of tax at 60% or 62% if you include NI.Surely he can go up to £125k per year and pay 40% with 45% over that?
If one tax should change, I suggest this one. I know so many people, including doctors that just don’t want to work and pay that level of tax. Therefore, the government doesn’t even get any tax!
greygoose said:
63 is a bit late to start a pension,
It's never too late, if your circumstances fit. If he's paid tax on an income for the last 3 years, say earning £30K a year, stick £90K in a pension and get the tax back.The best time to start a pension was maybe 5-40 years ago, depending on your age. But the 2nd best time is always now.
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hstewie said:
hstewie said: Depends entirely on his wider situation and you haven't given enough info to answer that.
Invested even modestly with a withdrawal rate of 4% (broadly considered a "safe" rule of thumb) he's fine.
If he needs £150K a year until he dies obviously it's slightly different isn't it?
Is the 4% rule still being used? It’s what my FA quoted 6-7 years back, not sure recent performance supports it.Invested even modestly with a withdrawal rate of 4% (broadly considered a "safe" rule of thumb) he's fine.
If he needs £150K a year until he dies obviously it's slightly different isn't it?
TwigtheWonderkid said:
It's never too late, if your circumstances fit. If he's paid tax on an income for the last 3 years, say earning £30K a year, stick £90K in a pension and get the tax back.
The best time to start a pension was maybe 5-40 years ago, depending on your age. But the 2nd best time is always now.
That'll only work if he's been part of a UK-registered pension scheme the last 3 years, as he has no current pension then he'll only be able to contribute this tax year. The best time to start a pension was maybe 5-40 years ago, depending on your age. But the 2nd best time is always now.
Internet advice strikes again!
If you don't have any relevant UK earnings (of which property proceeds are not included) then you can only pay in £3,600 into a pension, regardless of how much annual allowance you may have available.
Secondly, an annuity bought from cash is different to a pension annuity. The majority of what you get paid is classed as a return of your original capital and so only the minority is taxable. Therefore, you can have a £100k annuity income and be a non-taxpayer as I'd expect the interest component (the bit which is taxable) to be less than £12,570.
If you don't have any relevant UK earnings (of which property proceeds are not included) then you can only pay in £3,600 into a pension, regardless of how much annual allowance you may have available.
Secondly, an annuity bought from cash is different to a pension annuity. The majority of what you get paid is classed as a return of your original capital and so only the minority is taxable. Therefore, you can have a £100k annuity income and be a non-taxpayer as I'd expect the interest component (the bit which is taxable) to be less than £12,570.
steve_n said:
Internet advice strikes again!
If you don't have any relevant UK earnings (of which property proceeds are not included) then you can only pay in £3,600 into a pension, regardless of how much annual allowance you may have available.
Secondly, an annuity bought from cash is different to a pension annuity. The majority of what you get paid is classed as a return of your original capital and so only the minority is taxable. Therefore, you can have a £100k annuity income and be a non-taxpayer as I'd expect the interest component (the bit which is taxable) to be less than £12,570.
Sorry, I missed that pension part. Still worth looking at.If you don't have any relevant UK earnings (of which property proceeds are not included) then you can only pay in £3,600 into a pension, regardless of how much annual allowance you may have available.
Secondly, an annuity bought from cash is different to a pension annuity. The majority of what you get paid is classed as a return of your original capital and so only the minority is taxable. Therefore, you can have a £100k annuity income and be a non-taxpayer as I'd expect the interest component (the bit which is taxable) to be less than £12,570.
So many variables. Does he want to die with nothing or leave a legacy?
This isn't a bad approach though, build a ladder, to cover a minimum of 15 years, of low coupon gilts:
https://retirementace.co.uk/2023/04/tax-efficient-...
This isn't a bad approach though, build a ladder, to cover a minimum of 15 years, of low coupon gilts:
https://retirementace.co.uk/2023/04/tax-efficient-...
steve_n said:
Secondly, an annuity bought from cash is different to a pension annuity. The majority of what you get paid is classed as a return of your original capital and so only the minority is taxable. Therefore, you can have a £100k annuity income and be a non-taxpayer as I'd expect the interest component (the bit which is taxable) to be less than £12,570.
Good post 
I was wondering how he could possibly end up paying any significant tax just for spending money that was already his
(aside from vat, fuel tax and all the other ways we all pay!). 
tescorank said:
I personally think he’s better off putting in to a 5% interest bank account and apart from paying tax on the interest-has to about the same as a pension.
Judging by how my pension is performing at the moment this would be my advise too.1.5 million at 5% would be £75k interest a year minus tax. One thing you didn't mention was does he have children? If he does that changes everything as he will obviously want to leave them something.
If not then I would just leave it in the bank and spend £100k a year.
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