Very dull pension / home question
Discussion
Just sold my main residence so got 200K to play with. Now currently happily renting, in full time employment, I'm 50 with maybe 250K total in three current pension pots. I'm betting on house prices NOT going noticeably up the next five years. No dependents.
Used my cash ISA allowance with the proceeds of the sale, most of rest of it transferred to building society, with a years worth of salary left currently sitting in my current account.
My cunning idea is to pay in basically all of my salary in the next five years (living off "drawing down" from the 200k sale proceeds) into a decent pension provider (either one of my current ones or a better one), then take 25% out tax free in five years time when I'm 55. (If I need or want it either for a house deposit, silly car, etc. etc.)
Is this "sensible"?
Alternative would be to get back on the mortgage treadmill, but around me rents are "reasonable" (equivalent or less than the mortgage interest would be) and I reckon should stay that way.
Used my cash ISA allowance with the proceeds of the sale, most of rest of it transferred to building society, with a years worth of salary left currently sitting in my current account.
My cunning idea is to pay in basically all of my salary in the next five years (living off "drawing down" from the 200k sale proceeds) into a decent pension provider (either one of my current ones or a better one), then take 25% out tax free in five years time when I'm 55. (If I need or want it either for a house deposit, silly car, etc. etc.)
Is this "sensible"?
Alternative would be to get back on the mortgage treadmill, but around me rents are "reasonable" (equivalent or less than the mortgage interest would be) and I reckon should stay that way.
AnotherUsername said:
First observation is you can’t draw the 25% until 58.
As a 50 year old myself I’d say you’re a bit young to be working towards a closing plan. You will hopefully have another 10,000 days left!
Really, I am 51 and I am planning on being in a position where I can walk away in ten years time if I want to.As a 50 year old myself I’d say you’re a bit young to be working towards a closing plan. You will hopefully have another 10,000 days left!
Final few years I am hoping to put the maximum £60K allowance in and be able to live on the remainder and pay virtually no tax.
I would personally not want to bet on house prices not increasing in the next five years though, I would rather own a house than sell it and take the gamble.
From 6th April 2028 access to pensions will be from age 57. For defined contribution schemes, you pay money in and its a pot of money, then you can take 25% tax free up to a maximum of £268,275. The rest of your pot is then subject to tax at your marginal rate at the point you draw on it. Note that if you draw any taxable amount (even just £1), you trigger what is called mpaa, this reduces the amount you can put into a pension to £10k.
So, if you had a pot of £200k at age 57, you could take £50k tax free, anything over that would be taxed as income at your marginal rate and taking anything more than £50k would trigger mpaa.
You don't have to take 25%, you could take less and leave some for a later date. You also have the option of waiting until you want to finish work and draw the 25% like a salary ever month or once per year. For example say you want to take £20k per year, £5k would be tax free, the £15k is taxed but if no other income you get an allowance of £12,570 so, you'd pay 20% tax on £2,430. So, taking out £20k would give you £19,546 after tax.
Worth looking at moneyhelper.org
So, if you had a pot of £200k at age 57, you could take £50k tax free, anything over that would be taxed as income at your marginal rate and taking anything more than £50k would trigger mpaa.
You don't have to take 25%, you could take less and leave some for a later date. You also have the option of waiting until you want to finish work and draw the 25% like a salary ever month or once per year. For example say you want to take £20k per year, £5k would be tax free, the £15k is taxed but if no other income you get an allowance of £12,570 so, you'd pay 20% tax on £2,430. So, taking out £20k would give you £19,546 after tax.
Worth looking at moneyhelper.org
goingonholiday said:
From 6th April 2028 access to pensions will be from age 57.
Unless your scheme had a protected age of 55 written into it, I think prior to 2021.I would fall into the 57 category if this wasn’t the case with mine. Interestingly if I understand correctly even an 18 year old at the time with a qualifying pension is allowed a 55 access age.
Peterpetrole said:
Happy Jim said:
Kinda depends on your wage really!
Well the lump sum is going to be more than £125,000 so it'll be top 45% rate for any salary income even if minimum wage? goingonholiday said:
From 6th April 2028 access to pensions will be from age 57. For defined contribution schemes, you pay money in and its a pot of money, then you can take 25% tax free up to a maximum of £268,275. The rest of your pot is then subject to tax at your marginal rate at the point you draw on it. Note that if you draw any taxable amount (even just £1), you trigger what is called mpaa, this reduces the amount you can put into a pension to £10k.
So, if you had a pot of £200k at age 57, you could take £50k tax free, anything over that would be taxed as income at your marginal rate and taking anything more than £50k would trigger mpaa.
You don't have to take 25%, you could take less and leave some for a later date. You also have the option of waiting until you want to finish work and draw the 25% like a salary ever month or once per year. For example say you want to take £20k per year, £5k would be tax free, the £15k is taxed but if no other income you get an allowance of £12,570 so, you'd pay 20% tax on £2,430. So, taking out £20k would give you £19,546 after tax.
Worth looking at moneyhelper.org
Understood thanks for that detail, I'm thinking it through.So, if you had a pot of £200k at age 57, you could take £50k tax free, anything over that would be taxed as income at your marginal rate and taking anything more than £50k would trigger mpaa.
You don't have to take 25%, you could take less and leave some for a later date. You also have the option of waiting until you want to finish work and draw the 25% like a salary ever month or once per year. For example say you want to take £20k per year, £5k would be tax free, the £15k is taxed but if no other income you get an allowance of £12,570 so, you'd pay 20% tax on £2,430. So, taking out £20k would give you £19,546 after tax.
Worth looking at moneyhelper.org
I have a mate that rents, which was fine until they sold the house and he wanted to stay in the area but couldn’t find anything to rent.
I’d do the ‘paying someone else’s mortgage’ rent calculations saying you live till 85?
Remember paying rent is for life, owning ends once it’s paid off and you should have something growing in value at the end to sell.
I’d do the ‘paying someone else’s mortgage’ rent calculations saying you live till 85?
Remember paying rent is for life, owning ends once it’s paid off and you should have something growing in value at the end to sell.
I rented for nearly 11 years during my 20's and 30's, but that was in different countries with different rent controls (protection, price rise caps, etc) and as much as my uncle would tell me rentings dead money, i'd counter that you need a roof over your head regardless and the premium of renting allows me to work and travel at the same time, as i'm not tied to one place. However, having also rented for 2 years in the UK, rent controls are poor here and renters are treated badly, relatively, so i'd be very careful about not having a fully paid off roof over your head, unless your plan is to travel/move.
bmwmike said:
I rented for nearly 11 years during my 20's and 30's, but that was in different countries with different rent controls (protection, price rise caps, etc) and as much as my uncle would tell me rentings dead money, i'd counter that you need a roof over your head regardless and the premium of renting allows me to work and travel at the same time, as i'm not tied to one place. However, having also rented for 2 years in the UK, rent controls are poor here and renters are treated badly, relatively, so i'd be very careful about not having a fully paid off roof over your head, unless your plan is to travel/move.
I know there's no right answer and in the past I've very much been of the roof paid off school of thought. However, I look at my older golfing buddies (60s, 70s) and they frequently whinge about the house being too much for them, yadda yadda.
I have three "backups" -
1) Main plan is definitely retire abroad.
2) I do own a small one bed mortgage free BTL in the UK so if worst comes to the worst that's available.
3) If I need more cash for a dream house (nothing on the market I fancy in my reach currently) then I can withdraw (with tax penalty) from my ("artificially" boosted) pension.
No dependents as I say.
In that case with the BTL paid off and providing a back stop, and no dependents, I'd be off travelling asap or aiming to get the ball rolling on living abroad. Maybe an RV and ebike in the boot.
I'm 49 and 2/3rds, and I think how fast have the past 20 years gone? The next 20 will be quicker, if lucky enough to experience them.
I'm 49 and 2/3rds, and I think how fast have the past 20 years gone? The next 20 will be quicker, if lucky enough to experience them.
Edited by bmwmike on Friday 15th November 10:50
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