Best age for a man to take a private pension

AddicksAddict

Does anyone know if there's an optimal age for taking a private pension?

Friend Or Defoe

Start it today if possible.

Curb_It

Would it be a different age for a woman?

letthegoodtimesroll

Not advice but suspect it’s when you’ve got more money in the pot than you and your other half will ever need to live on for the rest of your lives. Other than that my guess is never. Pensions are the great con since the labour government saw them as a cash cow

bobmunro

Friend Or Defoe said:

Start it today if possible.

I think he meant when to start drawing rather than when to start paying in. If the latter then I agree, although pensions are not what they used to be!

When to start drawing it will be dependent on a number of things, but principally the size of the pot and your personal tax situation.

You need the advice of an IFA.

Croydon

Speak to an adviser!

soapy_jones

I am 55 in August. I am going to take 25% of the measly amount i have in the "biggest" pot as it is tax free. The remainder i hope to put into my workplace pension as i am sure that at the rate i am going i will be working till i am 77.

Now it is not a lot of money but my rationale is, that i can pay off a few bits so i can travel a bit lighter every month. An example being the car payments, i was forced to finance a new motor earlier in the year.

I count myself as a cautionary tale. I was well paid for many years but was profligate with my ill gotten gains. Only a certain maturity (not on CL of course) and low paid servitude in the voluntary sector has changed how i take care of my money.

So you youngsters out there. Look after every penny, enjoy yourselves of course but remember, if we are lucky you do get older.

Lecture over as my old man would say!

lolwray

make sure you get your 25% tax free

dont leave it too late if you have a sizeable pot as you may end up pay a lot more tax than you might think

and inbox me if you want to buy some magic beans

cafcfan

soapy_jones said:

I am 55 in August. I am going to take 25% of the measly amount i have in the "biggest" pot as it is tax free. The remainder i hope to put into my workplace pension as i am sure that at the rate i am going i will be working till i am 77.

Now it is not a lot of money but my rationale is, that i can pay off a few bits so i can travel a bit lighter every month. An example being the car payments, i was forced to finance a new motor earlier in the year.

I count myself as a cautionary tale. I was well paid for many years but was profligate with my ill gotten gains. Only a certain maturity (not on CL of course) and low paid servitude in the voluntary sector has changed how i take care of my money.

So you youngsters out there. Look after every penny, enjoy yourselves of course but remember, if we are lucky you do get older.

Lecture over as my old man would say!

If you like, this is a good example of why people need professional advice. Obviously I don't know your personal circumstances but if you are in receipt of any means-tested benefits, these could stop if you suddenly come into a capital sum. Alternatively, taking a lump sum might be a good idea if it means that it takes your pension payments (both state and private less any allowances) down below the 40% tax band.

Life and, in particular money, is complicated. One's state of health is another factor for consideration.

[I took my occupational pension a year early: it reduced income by 5%. (I figured I'd have to live around another 17 years before it cost me money.) I took no commutation. Conversely, like you are suggesting you will do, my wife took the full whack.]

clb74

You don't need a pension there's the state pension I'll be getting mine when I'm about 87.

Dippenhall

AddicksAddict said:

Does anyone know if there's an optimal age for taking a private pension?

You save as soon as you can, preferably the day after you are born, or if you have to pay for it yourself, as soon as you start working. If you know what compound interest does, there is nothing more to understand.

The word "pension" seems to be an obstacle for many just because it has had high profile rip offs by cowboys and our politicians. It should, not be used as an excuse to justify not saving. A pension is nothing more than investing money you choose not to spend so you've got something more than a State pension to spend when you stop earning.

Saying "I don't have a pension I don't trust them I invest in bricks and mortar" is still saying you are saving for a pension. It's just a different type of investment with different tax treatment, different rip offs, different risks and liquidity issues and your employer doesn't pay anything into it. Since Gordon Brown raided the pension system, and final salary pensions died, some favourable tax breaks ended and a "pension" investment is the same as any other investment. It can be a risky or as safe as you choose, attracting the same cowboys, after a slice of the action, as any other financial product you can buy.

It has tax treatment intended to incentivise you to save, and delay drawing until you approach retirement age, by giving a tax rebate on the amount you save. In addition:

1. If you work for an employer he has to add money to your pot
2. Your dependants get it all back if you die before you retire
3. Otherwise you can't draw on it until you are 55
4. If it's less than £30,000 you can take it all in cash (Only 75% being taxed)

If you want to produce an income of £10 a year on top of the State pension (say 5K) with an average lifespan you probably need a pot of £250k if it's invested low risk. If you live too long or it's poorly invested you run out of money. This is where trusted advice is needed.

Despite the moans and groans and resentment of pensioners by those now starting out on a working career, the reality is that because all employees are now forced to pay into a company scheme (unless they opt out) young people have the chance of matching the level of last centuries final salary pensions, albeit without guarantees, if they contribute enough early enough. It's because they are getting a foot on the compound interest escalator at the bottom of the stairs. Their problem will be how to save enough in 40 years of working to pay for 40 years of retirement. But starting to save as soon as you start working and paying a level percentage of pay as you get pay awards means 75% of your retirement pot might be earned by the contributions you make by time you are 35/40. That means if you start saving at 35/40 your pension pot will be 75% smaller. A huge number of employees missed out on the final salary carousel and are starting to save too late when the escalator's almost at the top of the landing.

A "pension" is nothing more than taking a decision to spend less now so you have something to spend when your income stops. A debate about where you invest, how much you save, tax advantages and alternative investments etc is not a debate about IF you should have a pension it's about the choice whether to save or not and how you plan to do it.

bobmunro

Dippenhall said:

AddicksAddict said:

Does anyone know if there's an optimal age for taking a private pension?

You save as soon as you can, preferably the day after you are born, or if you have to pay for it yourself, as soon as you start working. If you know what compound interest does, there is nothing more to understand.

The word "pension" seems to be an obstacle for many just because it has had high profile rip offs by cowboys and our politicians. It should, not be used as an excuse to justify not saving. A pension is nothing more than investing money you choose not to spend so you've got something more than a State pension to spend when you stop earning.

Saying "I don't have a pension I don't trust them I invest in bricks and mortar" is still saying you are saving for a pension. It's just a different type of investment with different tax treatment, different rip offs, different risks and liquidity issues and your employer doesn't pay anything into it. Since Gordon Brown raided the pension system, and final salary pensions died, some favourable tax breaks ended and a "pension" investment is the same as any other investment. It can be a risky or as safe as you choose, attracting the same cowboys, after a slice of the action, as any other financial product you can buy.

It has tax treatment intended to incentivise you to save, and delay drawing until you approach retirement age, by giving a tax rebate on the amount you save. In addition:

1. If you work for an employer he has to add money to your pot
2. Your dependants get it all back if you die before you retire
3. Otherwise you can't draw on it until you are 55
4. If it's less than £30,000 you can take it all in cash (Only 75% being taxed)

If you want to produce an income of £10 a year on top of the State pension (say 5K) with an average lifespan you probably need a pot of £250k if it's invested low risk. If you live too long or it's poorly invested you run out of money. This is where trusted advice is needed.

Despite the moans and groans and resentment of pensioners by those now starting out on a working career, the reality is that because all employees are now forced to pay into a company scheme (unless they opt out) young people have the chance of matching the level of last centuries final salary pensions, albeit without guarantees, if they contribute enough early enough. It's because they are getting a foot on the compound interest escalator at the bottom of the stairs. Their problem will be how to save enough in 40 years of working to pay for 40 years of retirement. But starting to save as soon as you start working and paying a level percentage of pay as you get pay awards means 75% of your retirement pot might be earned by the contributions you make by time you are 35/40. That means if you start saving at 35/40 your pension pot will be 75% smaller. A huge number of employees missed out on the final salary carousel and are starting to save too late when the escalator's almost at the top of the landing.

A "pension" is nothing more than taking a decision to spend less now so you have something to spend when your income stops. A debate about where you invest, how much you save, tax advantages and alternative investments etc is not a debate about IF you should have a pension it's about the choice whether to save or not and how you plan to do it.

There is no limit as to how much you can cash out of your pot (assuming you are 55 or older). If for example you had a £1 million pot it could all be cashed out - £250k tax free and £750k taxed at your highest rate.

I'm not advising it though!

IdleHans

Can you take your 25%, keep working, and reinvest the 25% in your pension and get tax relief on it all over again?



Ive just done some research. The answer is yes, up to a very limited point, but it's a bit of a grey area with HMRC.

AddicksAddict

IdleHans said:

Can you take your 25%, keep working, and reinvest the 25% in your pension and get tax relief on it all over again?



Ive just done some research. The answer is yes, up to a very limited point, but it's a bit of a grey area with HMRC.

In the paperwork I got from HMRC, this is most definitely not allowed. However, the wording says you can't put money into a pension after taking it tax-free from a pension so it looks like you can put money in, getting the tax relief, then take the same amount out. I'm sure HMRC would try to fight that if they spotted it.

CharltonKerry

IdleHans said:

Can you take your 25%, keep working, and reinvest the 25% in your pension and get tax relief on it all over again?



Ive just done some research. The answer is yes, up to a very limited point, but it's a bit of a grey area with HMRC.

I’m taking my state pension and investing that into my private pension, which has caused some head scratching from the tax man, works for me.

cafcfan

IdleHans said:

Can you take your 25%, keep working, and reinvest the 25% in your pension and get tax relief on it all over again?



Ive just done some research. The answer is yes, up to a very limited point, but it's a bit of a grey area with HMRC.

I believe so, in a SIPP or something. But I seem to recall you can't lob in more than your on-going annual salary or £2,880 if you've packed up work.

ShootersHillGuru

Yesterday if not earlier.

golfaddick

Croydon said:

Speak to an adviser!

best comment I've read on here !!

Your circumstances will be different to everbody else as will your needs. There is no one answer & will depend on a number of factors, some being:

How much do you have in your pension "pot"
How old are you now
Are you working
do you want to fully retire
when do you get your state pension
do you own your own property or rent
do you have any other assets
how much do you need to live on
how is your health

Remember, you don't have to buy an annuity & would advise most clients (most being the operative word) to look at going into Drawdown.

but take advice from a professional.

golfaddick

CharltonKerry said:

IdleHans said:

Can you take your 25%, keep working, and reinvest the 25% in your pension and get tax relief on it all over again?



Ive just done some research. The answer is yes, up to a very limited point, but it's a bit of a grey area with HMRC.

I’m taking my state pension and investing that into my private pension, which has caused some head scratching from the tax man, works for me.

That is ok.

golfaddick

IdleHans said:

Can you take your 25%, keep working, and reinvest the 25% in your pension and get tax relief on it all over again?



Ive just done some research. The answer is yes, up to a very limited point, but it's a bit of a grey area with HMRC.

No, its classed as recycling. You can put in up to £4k pa once you've taken your pension but I would ask why would you want to ?

newyorkaddick

Admittedly it's a high-class problem but there is a risk of investing too much into a pension given that pots above £1m are taxed at punitive rates.

It may sound fanciful but if a 21-year old started a pension with £1,000 and put £250 per month into it aged 21-30, £500 per month aged 31-40, £750 per month aged 41-50 and £1000 per month aged 51-60 then they'd have a pension pot of £1m aged 60 with an annual growth rate of just 6.6%.

24 Red

newyorkaddick said:

Admittedly it's a high-class problem but there is a risk of investing too much into a pension given that pots above £1m are taxed at punitive rates.

It may sound fanciful but if a 21-year old started a pension with £1,000 and put £250 per month into it aged 21-30, £500 per month aged 31-40, £750 per month aged 41-50 and £1000 per month aged 51-60 then they'd have a pension pot of £1m aged 60 with an annual growth rate of just 6.6%.

Yes, although the total lifetime allowance currently increases with CPI (I think) so it is now £1.03 million from memory. Mind you, I wouldn't trust the government not to move the goalposts yet again.

CharltonKerry

golfaddick said:

CharltonKerry said:

IdleHans said:

Can you take your 25%, keep working, and reinvest the 25% in your pension and get tax relief on it all over again?



Ive just done some research. The answer is yes, up to a very limited point, but it's a bit of a grey area with HMRC.

I’m taking my state pension and investing that into my private pension, which has caused some head scratching from the tax man, works for me.

That is ok.

Should hope so, how much that bit of advice cost me

AFKABartram

I wished I was clever enough to work out this stuff

ChicagoAddick

AFKABartram said:

I wished I was clever enough to work out this stuff

I thought you worked in pensions. Or was it IT ;-)

McBobbin

I wouldn't take his brexit advice but @golfaddick knows about pensions (never met him, but IFAs have to do ridiculous CPD... It has to be true!)

LargeAddick

I’m 55 in August and crystallising a part of my SIPP and taking 25% tax free which, with my wife retiring, will allow us to continue to live the lifestyle to which we have become accustomed. I will do the same for the next few years until she reaches 55 and re-evaluate the situation. Luckily I have a decent pension pot. My IFA is ensuring I do this in the most tax efficient way possible.

In the meantime I will continue working full time, albeit locally now, but hope to pack in and go part time when I’m about 58.

bertpalmer

If your talking about taking it out,take it asap,before they move the goal posts again,....in my opinion

golfaddick

CharltonKerry said:

golfaddick said:

CharltonKerry said:

IdleHans said:

Can you take your 25%, keep working, and reinvest the 25% in your pension and get tax relief on it all over again?



Ive just done some research. The answer is yes, up to a very limited point, but it's a bit of a grey area with HMRC.

I’m taking my state pension and investing that into my private pension, which has caused some head scratching from the tax man, works for me.

That is ok.

Should hope so, how much that bit of advice cost me

nothing. my first client appt is always free of charge.

golfaddick

newyorkaddick said:

Admittedly it's a high-class problem but there is a risk of investing too much into a pension given that pots above £1m are taxed at punitive rates.

It may sound fanciful but if a 21-year old started a pension with £1,000 and put £250 per month into it aged 21-30, £500 per month aged 31-40, £750 per month aged 41-50 and £1000 per month aged 51-60 then they'd have a pension pot of £1m aged 60 with an annual growth rate of just 6.6%.

I've met many clents & none have a current pension pot (built up from just their own contributions) of £1m by the age of 60. Final salary schemes are a totally different beast.

Dippenhall

bobmunro said:

Dippenhall said:

AddicksAddict said:

Does anyone know if there's an optimal age for taking a private pension?

You save as soon as you can, preferably the day after you are born, or if you have to pay for it yourself, as soon as you start working. If you know what compound interest does, there is nothing more to understand.

The word "pension" seems to be an obstacle for many just because it has had high profile rip offs by cowboys and our politicians. It should, not be used as an excuse to justify not saving. A pension is nothing more than investing money you choose not to spend so you've got something more than a State pension to spend when you stop earning.

Saying "I don't have a pension I don't trust them I invest in bricks and mortar" is still saying you are saving for a pension. It's just a different type of investment with different tax treatment, different rip offs, different risks and liquidity issues and your employer doesn't pay anything into it. Since Gordon Brown raided the pension system, and final salary pensions died, some favourable tax breaks ended and a "pension" investment is the same as any other investment. It can be a risky or as safe as you choose, attracting the same cowboys, after a slice of the action, as any other financial product you can buy.

It has tax treatment intended to incentivise you to save, and delay drawing until you approach retirement age, by giving a tax rebate on the amount you save. In addition:

1. If you work for an employer he has to add money to your pot
2. Your dependants get it all back if you die before you retire
3. Otherwise you can't draw on it until you are 55
4. If it's less than £30,000 you can take it all in cash (Only 75% being taxed)

If you want to produce an income of £10 a year on top of the State pension (say 5K) with an average lifespan you probably need a pot of £250k if it's invested low risk. If you live too long or it's poorly invested you run out of money. This is where trusted advice is needed.

Despite the moans and groans and resentment of pensioners by those now starting out on a working career, the reality is that because all employees are now forced to pay into a company scheme (unless they opt out) young people have the chance of matching the level of last centuries final salary pensions, albeit without guarantees, if they contribute enough early enough. It's because they are getting a foot on the compound interest escalator at the bottom of the stairs. Their problem will be how to save enough in 40 years of working to pay for 40 years of retirement. But starting to save as soon as you start working and paying a level percentage of pay as you get pay awards means 75% of your retirement pot might be earned by the contributions you make by time you are 35/40. That means if you start saving at 35/40 your pension pot will be 75% smaller. A huge number of employees missed out on the final salary carousel and are starting to save too late when the escalator's almost at the top of the landing.

A "pension" is nothing more than taking a decision to spend less now so you have something to spend when your income stops. A debate about where you invest, how much you save, tax advantages and alternative investments etc is not a debate about IF you should have a pension it's about the choice whether to save or not and how you plan to do it.

There is no limit as to how much you can cash out of your pot (assuming you are 55 or older). If for example you had a £1 million pot it could all be cashed out - £250k tax free and £750k taxed at your highest rate.

I'm not advising it though!

The £750K is technically a flexible drawdown pension taken as a single payment and HMRC only allow flexible drawdown it if you can show you already have an existing reliable income of £12,000 p.a. The £30k limit doesn't have any restrictions.

There is also the Lifetime Allowance limit and if the pot was worth £2m you would have additional 25% tax charge to pay on the amount above the LTA.

It's a tax rip off and HMRC are very happy if you are tempted to take it all in cash.