Starting Pension drawdown, tax-efficiently
Starting Pension drawdown, tax-efficiently
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gmaz

Original Poster:

4,927 posts

226 months

Yesterday (09:55)
quotequote all
While my FA is on holiday I'd like some advice on how to start taking my pensions drawdown in the most tax-efficient way so I have some talking points with the FA when she returns.

I'm just turned 60, am semi retired with a part time job that brings in about £16K pa (£3.5K to pension/dividends, £12.5K to salary)

Using the 4% drawdown guideline, I can easily afford £2K per month from one SIPP pension, and £1K pm from another SIPP. I've already had a £40K tax-free lump sum from the larger SIPP.

My wife is 61 and not working, so I've asked her to drawdown £1K pm from her pension as she can do this without paying tax? We have no mortgage and an adequate amount of savings in ISAs

What the most tax-efficient way for us to get a steady monthly income?

Thanks

mikeiow

7,231 posts

146 months

Yesterday (22:31)
quotequote all
gmaz said:
While my FA is on holiday I'd like some advice on how to start taking my pensions drawdown in the most tax-efficient way so I have some talking points with the FA when she returns.

I'm just turned 60, am semi retired with a part time job that brings in about £16K pa (£3.5K to pension/dividends, £12.5K to salary)

Using the 4% drawdown guideline, I can easily afford £2K per month from one SIPP pension, and £1K pm from another SIPP. I've already had a £40K tax-free lump sum from the larger SIPP.

My wife is 61 and not working, so I've asked her to drawdown £1K pm from her pension as she can do this without paying tax? We have no mortgage and an adequate amount of savings in ISAs

What the most tax-efficient way for us to get a steady monthly income?

Thanks
Tsk tsk. Imagine paying a FA, then letting them go on holiday & instad asking a bunch of forum folk for advice wink

Well…yes, your wife should certainly take her £12.5k zero tax allowance from somewhere, so her pensions sounds the right place.

If you plan to continue your part time job, then that is (roughly) your zero tax allowance done, so anything else is at 20%….unless you take from your ISAs.

So yes, you can take 3k from your pensions, if you accept that will be taxed at 20%. And/or take money from the ISAs with no tax due.

Are you hoping for other ways to turn those into a lower tax?
I imagine you could invest something into Venture Capital Funds to then counter the tax paid, but how complicated would you like your finances to be?


Maybe some smarter than me will pop up with ideas!

gmaz

Original Poster:

4,927 posts

226 months

mikeiow said:
Tsk tsk. Imagine paying a FA, then letting them go on holiday & instad asking a bunch of forum folk for advice wink

Well…yes, your wife should certainly take her £12.5k zero tax allowance from somewhere, so her pensions sounds the right place.

If you plan to continue your part time job, then that is (roughly) your zero tax allowance done, so anything else is at 20%….unless you take from your ISAs.

So yes, you can take 3k from your pensions, if you accept that will be taxed at 20%. And/or take money from the ISAs with no tax due.

Are you hoping for other ways to turn those into a lower tax?
I imagine you could invest something into Venture Capital Funds to then counter the tax paid, but how complicated would you like your finances to be?


Maybe some smarter than me will pop up with ideas!
I was wondering about taking more tax-free lump sums from the pensions and using that to avoid the 20%. That would amount to about £130K which I could invest somewhere and take a regular (tax-free?) income from there?

dxg

9,572 posts

276 months

My understanding was that it was best to keep the tax free portion in the fund, then claim back tax against that for the next however many years until such time as it is used up.

If you're lucky enough to have a pension that brings you over the threshold, of course.

I wait to be corrected...