5 Reasons NOT To Take Your Pension TAX-FREE CASH

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Too many people get to retirement and, when choosing their pension options, decide to take all the tax-free cash out, just because they can.
Here are five reasons why that might NOT be a good idea.
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Опубликовано:

9 июл 2024

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@MeaningfulMoney 2 года назад

Here are the two videos I mentioned: 🔴 ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-jEbYkc1EwZc.html - Click here to watch Pension Death Benefits 🔴 ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-NOIivz8_QuA.html - Click here to watch Drawdown vs UFPLS vs Annuity

@adrianharris5209 4 месяца назад

What if you have a limited life expectancy.

@Justso65 2 месяца назад

The reason I want to take out my full tax free cash is I want to bridge the gap between late 50’s and a D pension at 65 and subsequently a state pension at 67. If I draw around £16k per year I could take 25% tax free and the rest would keep me at or below the tax free earnings allowance. However, I can’t live on around 16k but if I take more I will be taxed. If I take my full 25% on day one I can live off that for quite a few years while still drawing exactly the tax fee allowance from my pot each year. So I get more tax free out. Eventually I will run out of tax free cash and by that time I will need to pay tax on earnings over the tax free allowance. But in the years to that point I have extracted and lived off a significant amount of my pension tax free.

@mackaymoose6280 2 года назад

Yes, please on filming the video on the reasons to take your tax free lump sum.

@MeaningfulMoney 2 года назад

Noted, thank you. Keep an eye on the channel…

@haroldbetterson1877 2 года назад

Amen

@nslator1 2 года назад

Ditto

@mapstheway9763 2 месяца назад

Reasons to take tax free sum please 👍

@phil4162 4 месяца назад

One good reason to take the maximum drawdown is that it won’t be one before the government attack pension income by increasing taxation

@stevemccann4327 Месяц назад

absolutely right thats the next labour target

@phil4162 Месяц назад

@@stevemccann4327 and quite right too. Pensioners have never been better off than now and it’s all at the expense of the younger generation. We need to accelerate wealth redistribution from the richer old generation to the poorer young generation

@pauljones5403 2 года назад

Another informative video, thanks for sharing in uncomplicated jargon - you keeping making the videos and we will continue to watch them for sure.

@MeaningfulMoney 2 года назад

I'm grateful, Paul - thank you for being here!

@m42tyn 2 года назад

As ever great video. For me these have been confirmation that I have taken the right approach (I had to do loads of research of my these videos would have really helped me 3-4 years ago). Keep them coming 👍👍👍

@MeaningfulMoney 2 года назад

Sorry to be late to the party! Glad all has ended well…

@jamessaddler1 2 года назад

Yes please! Reasons why you should take all your TFC would be great. In my 40s and love dorking out, thinking about retirement planning! Love the vids (and podcast)

@MeaningfulMoney 2 года назад

Dorking out - love it! Thanks for being here, James

@JamieSandersonx 2 года назад

Just subscribed - this is really useful info. I’m in my mid 30’s and just getting my head around this for future planning.

@MeaningfulMoney 2 года назад

Good to have you with us, Jamie - glad it was helpful!

@andypandy9931 2 года назад

Good advice relevant to me. More of this please.

@MeaningfulMoney 2 года назад

Thanks Andy - glad it was helpful!

@jockster5525 2 года назад

Quality show dude thanks for your efforts ☺️

@MeaningfulMoney 2 года назад

Cheers Jock - I appreciate it! 🙏🏻👊🏻

@jeremyaustin9103 5 месяцев назад

This is brilliant.

@mark.e.p 2 месяца назад

New to your channel. I'm a pensioner this year. Thanks for your advice.

@ivoreathorne5568 2 года назад

Great video. Straight to the point, no nonsense. And yes please - video why to take the tax free lump sum.

@MeaningfulMoney 2 года назад

Noted, Ivor - watch this space!

@BellydancingAmazon 2 года назад

Glad I found your channel, I'm a financial planner from South Africa. I like your style

@MeaningfulMoney 2 года назад

Always an honour to have the videos watched by fellow professionals. Great to have you with us, Melissa!

@burtonyan8467 2 года назад

Very informative!

@MeaningfulMoney 2 года назад

Thank you 🙏🏻

@adrianmortimer3369 2 года назад

Pete many thanks once again for really useful advice. At a mere 51, this helps me to make better decisions in the future. Yes 5 reasons why would be great. Keep up the good work :)

@MeaningfulMoney 2 года назад

Thanks Adrian - lots more to come...

@richardp1481 2 года назад

Great set of videos. Yes to why you should take TFC. Also, loved the three scenarios from the recent video you did explaining the LTA issues. Any chance you could explain reaching the LTA before age 75 and what then happens at age75 wrt paying more LTA. Thanks again for these invaluable videos

@MeaningfulMoney 2 года назад

Thanks Richard - all noted!

@familymustoe 2 года назад

Thanks Pete for another great video. One reason I have thought it would be good to take the tax free lump sum for a DB scheme is where taking the tax free cash brings the annual pension payments below the 40% tax band. Not taking the tax free cash may leave the pensioner with a higher gross income but paying more tax as he/she is left above the 40% tax band.

@MeaningfulMoney 2 года назад

Yep, that could be a reason for sure. Thanks for watching!

@paulkane6645 9 месяцев назад

The success of this approach depends on how rosy the commutation factor is in your DB scheme and your life expectancy. In my DB scheme, the low factor means a lump sum makes a relatively big dent in my Pension. In scenario A), I take a lump sum to reduce the 40% tax burden on my pension and then draw down the invested Tax-Free lump sum to augment my reduced pension. My lump sum cash will last about 12 yrs. After that, I have to live with my dented Pension and reduced NET. In scenario B), I don’t take a lump sum, so I pay more tax as more pension is exposed to the 40% rate (as per your comment). The calcs show that, ultimately, I will receive more NET every month for my whole life - which is hopefully more than 12yrs retirement. I take the difficult mindset that paying extra Tax is necessary. I consider the DB scheme as an inexhaustible pot of money that I didn’t earn through hard work. So, when I detach myself from it’s provenance, I have less concern for the higher tax taken. If I live longer than 12 yrs, then I will receive higher NET overall than any lump sum 'trade-off'.

@vernonwells4093 2 года назад

Pete, great video as usual.

@MeaningfulMoney 2 года назад

Cheers, Vernon!

@nicklazenby2123 2 года назад

Another great price of advice - I didn’t see all of these myself some but not all

@MeaningfulMoney 2 года назад

Glad it was helpful, Nick

@carlksykes 6 месяцев назад

Yes to the next video I was in the NHS 95 scheme took it at 62 and took the max lump sum. Rejoined the new 2015 scheme. This was to reduce my tax (higher rate) on my new Inc pension. Intention is to ISA the lump sum. Reduce income by paying additional amounts into the new pension. Hopefully leveling up life time income and having cash available for big spends IE new car uPVC double glazing. Holidays etc. Hope it works out ..........😊

@heatherjeanabbott5783 Год назад

Always useful but aimed at those with large pot and savings. I am a "waspie" not allowed to join company pension hntil 25 years old but then took time out to care for children. My pot is no where near the size you mention - perhaps one aimed at my level would be helpful to lots of people. Also my pension pot lost £12000 last year - am mortified! Still paying, along with my employer, into this bottomless pit.

@jayaveld124 2 года назад

Good Informative and valuable video. Thank you Sir

@MeaningfulMoney 2 года назад

Thank you Jayavel - appreciate the kind words

@nickfifield1 2 года назад

Yes please make the next video ! 👍🏻

@MeaningfulMoney 2 года назад

OK Nick - will do!

@gc8074 2 месяца назад

Good to see you’ve found another hobby after your ski jumping fiasco has finished Eddie though I did enjoy your film it was very good

@northernblue1093 2 месяца назад

Good, clear advice.

@MeaningfulMoney 2 месяца назад

Glad it was helpful!

@davidcollier6520 3 месяца назад

Many thanks for posting this and it all made good sense, your videos are clear and you keep things simple which I really like. I have a few questions about retirement including how to fund a second place. We'd like a little base in Flanders with a budget of €250,000 and wonder whether we should use tax free cash from the pensions or cash from our ISAs. Is that the sort of thing I should get answers to from subscribing to MeaningfulAcademy?

@chriswiltshire2996 2 года назад

Being ‘intentional’ is the key word, as you say Pete. I took out 2 chunks of tax-free pension cash to fund a property project 3 years ago, partly because I didn’t want to leave all my pension eggs in one basket and at the mercy of the stock market. The house is now complete and I’m cashing in and selling up. If the agent is correct, the property has doubled in value. In contrast, the stock market has struggled. It was a risk, but it appears to have paid off, although I’m glad I have left the rest of the pension to build for another day

@MeaningfulMoney 2 года назад

Love this! Intentional indeed. Thought through, considered and it paid off. Kudos!

@paultaylor7082 4 месяца назад

Good move by you. For the last 25 year plus, property prices have, on average, kept well ahead of inflation. Currently there are over 3 million rentiers in the UK, who own at least one property which is rented out. Flipping houses, buying cheap at auction and doing them up, then quickly selling them, is also a good idea. However, Buy to Let, with now higher than usual interest rates, is not such a good prospect.

@maddog167 2 года назад

I would definitely like to see the reasons why to take the maximum tax free cash video Pete, particularly addressing the issue of the LTA. Because surely if you’re close to or already over the LTA, then taking cash out now from a DC find would help in mitigating against future growth and exceeding the LTA (with its eye watering 55% tax rate).

@MeaningfulMoney 2 года назад

Noted, maddog167, thank you

@yogiparashara4016 2 года назад

Great Video Pete - yes it would be useful to do a video on Why we Should take the tax free sum out of our pension pot

@MeaningfulMoney 2 года назад

Noted, thank you!

@reekie19 2 года назад

Yes to the follow up video on Why you should take the tax free cash.

@MeaningfulMoney 2 года назад

OK Liza - watch this space!

@vivabielsamot5828 4 месяца назад

The way the world is and the "sudden" decline in peoples health I'd advise in taking ALL your pensions if over 55 and enjoy it while you can , when the crash comes you'll lose most of it anyway!

@1evilpie 2 года назад

Would love to see reasons TO take the lump sum please. I'm currently about 3 years from an early retirement and taking the lump or part of it to bring down my mortgage payment once my fixed rate finishes is definitely a consideration. Thing is though if I leave it invested I can probably afford the bigger mortgage anyway...... I guess it'll come down to interest rates at the time and also whether my fund is in reasonable shape. Thank you for all of your videos, they've been a huge help to me in recent months planning my retirement. I'm now completely "intentional".....

@MeaningfulMoney 2 года назад

Noted! And you’re welcome!

@johnwilliams8869 2 года назад

Don't often comment Pete, but just wanted to say how incredibly useful this video was... I'm going to retire in about 3 years time and always have been rather perplexed/confused as to why taking the 'conventional wisdom' of taking the tax free lump sum was a good idea. Surely better to take the tax free cash as needed over time and leave the rest to grow in the pension wrapper.

@MeaningfulMoney 2 года назад

Glad it was useful, John - thank you. The point really is to be intentional and think through the options for YOU and your situation. Conventional wisdom is at best a kind of mushed up average of what kinda makes sense for many people, but it might make no sense for us as individuals.

@nunchuck7341 2 года назад

Great info again. Like to here your comments on taking lump sum. , one reason not married and no kids. So no dependants what so ever.

@MeaningfulMoney 2 года назад

A valid reason indeed - thanks for watching!

@Ken_H_ 2 года назад

Great info, I'd like a video on why you should take your tax free cash too as I'm in a DB scheme and will have this decision to make in a few years 👍

@MeaningfulMoney 2 года назад

Thanks Ken - I'll get right on it!

@Chills124 2 года назад

Great video! Luckily we started quite early investing into our ISA's and we are hoping to retire a little bit earlier (still 20 years to go!). I have a DB and OH has DC which we have both paid into but we dont even factor it into our retirement planning, so hopefully it will be a nice bonus when we get there. It will also be super beneficial tax wise as my allowance will only be used up with my DB and State pension whilst my ISA will hopefully remain tax free to withdraw from.

@MeaningfulMoney 2 года назад

All true. Don't discount the benefits of complementing your ISA savings with pensions. I did a video called Pension vs ISA - might be worth a watch: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-y-4s1wqwQ7k.html

@celialyon1273 2 года назад

Always useful information Pete. As several other comments have said, a comparative video on why we SHOULD take the 25% tax free cash would be really helpful. Would help to make our intentional decisions!

@MeaningfulMoney 2 года назад

OK Celia - watch this space.

@fatfish5690 2 года назад

I was thinking placing it in a GIA for 12.5k CGT , combine that with 12.5k IncTx allowance, thats 25k tax free. So its more tax efficient than just keeping the whole lot solely in a pension. Everyone I speak to thinks its a terrible idea though so I'm deffo out of step on it.

@Brian-om2hh 2 года назад

I took my maximum allowed lump sum 5 years ago. We wanted to finance the build of an extension on our property, without borrowing any cash. We no longer have a mortgage. The extension cost around £30k, so I still had a tidy sum left over for a rainy day...

@MeaningfulMoney 2 года назад

Sounds perfect, Brian! 👍🏻

@Richard-kf7ul 2 года назад

Hi Pete, another excellent video. thank you. In the next video, I'd be interested to know your views on re-investing £4k Money Purchase Annual Allowance (MPAA) back into a SIPP after accessing the pot. Also to explain the rules & tax relief.

@MeaningfulMoney 2 года назад

Noted, Richard, and thanks!

@julias-shed 2 года назад

I think reasons for tax free cash would be interesting. I’m taking some to pay off buy to let mortgage. Means more income now which is useful for me.

@MeaningfulMoney 2 года назад

Cool. Watch this space!

@andyphilipson1799 2 года назад

Great video. Yes please for the reasons to take the sum tax free

@MeaningfulMoney 2 года назад

Thanks Andy, and noted!

@mikejones4516 2 года назад

yep, lets see the reasons why you should plz. love the content!

@MeaningfulMoney 2 года назад

Coming on Monday!

@barrysayers6833 2 года назад

I have only recently come across your channel, so I hope it isn't out of order to make a suggestion: about equity release. As far as I can tell, you haven't done a video on this topic for about 10 years(?) during which time house prices have reached truly insane levels and (although they are beginning to rise again now) interest rates are still really low. For what it is worth, my own motivation is to release some money for our children. If it's possible to do an update including plans that you can mitigate by making repayments, that would be really helpful. Apologies if I have missed something more recent.

@MeaningfulMoney 2 года назад

That's actually a really good idea, Barry - thanks for the nudge and watch this space!

@drewski5150 10 месяцев назад

An old video, but it got me thinking about buying a nicer house for retirement. Would love to see a video on using tax-free cash vs income drawdown to buy a home and the tax implications of this. Keep up the awesome work, Pete! 🙂

@TheJuryIsOut 2 года назад

Some compelling reasons not to take the tax free lumpsum from a DC pension fund Pete. I live outside the UK so my comments might not be entirely correct. However if one is drawing an income from the DC fund it makes business sense to take the maximum tax free portion and live off these funds first. If you didn't do so you would be paying tax on any drawdowns unnecessarily as these are taxed as income from the very first payment. If one has sufficient discretionary funds to live off then your points about estate planning benefits etc makes perfect sense. In some Countries the tax gets progressively higher as one draws a larger lumpsum from a DC fund at retirement. Even under this scenario it may still make sense to draw the maximum lumpsum factoring in the progressive taxation especially if this equates to a lesser overall tax rate when compared to just drawing a regular income. I'm sure you will address these issues in a future presentation. Great content. Thanks

@MeaningfulMoney 2 года назад

Hi Harold - interesting points. I can't speak to the position in other countries, of course. And a great deal depends on the individual situation. you may actually want to draw taxable income from a pension if that income falls within the 0% tax band - the personal allowance. As ever, there are as many different situations as there are viewers, which is why I can only present things to think about, rather than definitive answers. I'm glad they're helpful though - thanks for watching!

@TheJuryIsOut 2 года назад

@@MeaningfulMoney you're absolutely right Pete. I live in South Africa and youtube recommended your video. Whilst the laws differ from Country to Country some points of principle and strategy are universal hence I find your content useful. Most of your comments regarding Not taking the tax free lumpsum apply to us as well. However, our tax threshold is so low as to be of no benefit to anyone so maximizing any taxfree lumpsums is the way to go unless one factors in everything you covered earlier. Will continiue to watch your content as you have a refreshing presentation style and very topical subject matter. It's also noteworthy that you see fit to respond to as many viewers as you do. Best wishes.

@wharpblast264 2 года назад

Great. More information for members of DB schemes would be useful. I am a member of a DB scheme. I found the 25% cash free amount from the scheme was about 50k. I looked at buying an annuity to replace the lost income the cost was around 100k (at best). Not a good deal. The reason is the scheme was setup decades ago when life expectancies were much lower. The formulas used to calculate the 25% have probably never been reviewed as is likely to cost the scheme money. Hence subtle promotion of the 25% as likely to save the scheme in the long term and reduces future potential liabilities. Only two circumstances I can think of for taking cash from a DB scheme are poor health or high interest debt.

@MeaningfulMoney 2 года назад

I mention exactly this point in the video coming on Monday

@wharpblast264 2 года назад

@@MeaningfulMoney Thanks. I also have a question about inheritance. Can pension funds also be inherited by non-dependants ? For example more distant relatives like cousins or even charities. Would it still come outside Inheritance Tax ?

@chapman9230 2 года назад

I plan on taking a big chunk of tax free. I want it to be readily accessible to pay for house repairs etc. Check out the cost of jobs at moment on my four bed modern home. New plastic facias and gutters 6k. New garage door 1 k. New boiler 3.5k. New windows 16 k. I am also planning to buy a bigger home on retirement.

@terrybrown3486 4 месяца назад

Thanks Pete. I'm retiring in a few years time and thinking of taking full TFC as hit LTA limit. Pay off mortgage and use the rest to live on while taking the my personal annual allowance £12570 out of the remaining pension pot until the TFC is used up. I can then worry about taxed pension withdrawal.

@MeaningfulMoney 4 месяца назад

Sounds like a decent plan! 👍🏻

@geoffhunter5049 2 года назад

Agree that a video on why you should take tax-free cash would be helpful. Might taking it and putting it in a GIA mitigate the effects of LTA charge at 75?

@MeaningfulMoney 2 года назад

Potentially, yes - definitely a consideration

@PompeyMatt17 2 года назад

I've been talking to my colleagues about your channel...so you should have some new subs about..........now... brilliant as always Pete

@MeaningfulMoney 2 года назад

And I’m very grateful, Matt!

@Lloyd1885 3 месяца назад

Its great to get some clear and unbiased advice regarding pensions, thank you. I rang one advisor who said they couldn't advise me because mine is a local government pension and they are 'very complicated'...(great!) My actual pension office were better...but said that I would pay tax on a yearly pension of 11k...I thought anything under 12.5 k wasn't taxable?

@MeaningfulMoney 3 месяца назад

You’re right - if your £11k pension is your only income you wouldn’t pay tax. It’s taxable income, but it would be taxed at 0% if you see what I mean, aa it would fall within the personal allowance. Once your state pension kicks in, this would take up much of your personal allowance, making more of your work pension taxable.

@Lloyd1885 3 месяца назад

@@MeaningfulMoney thank you 👍🏽

@timblake5777 2 года назад

Pete. Very clear. Thanks as always. I know impossible to predict but any view on whether the tax free 25% might disappear? Perhaps ‘a bird in the hand?’ Cheers

@MeaningfulMoney 2 года назад

For as long as I’ve been practising, there have been rumours of this. None more so than when they renamed it Pension Commencement Lump Sum. Yes, maybe it’s worth having the bird in the hand, but I’m not sure I’d let that be the prime driver of the decision or not to take the cash.

@farscapeapes 2 года назад

i took full pension from my wroks pension, best thing i ever done, all the other people i worked with took lump sums out of their pensions and said i was mad not too, but pension is almost my old working wage ,

@MeaningfulMoney 2 года назад

Love that!

@ManncubDad 2 года назад

Great video Pete. But can I add a +1 to all those that have asked about the TFLS considerations for DB pensions. If (all or some) TFLS is not taken, its converted (commutated) to more pension. How do we calculate if the commutation offer is worth doing, over taking the cash ?

@MeaningfulMoney 2 года назад

This is a great point, PM - thanks for being specific - you've just written one of the points for me in the next video!

@BRI535D 2 месяца назад

Taking the tax free cash is a very sensible thing to do especially when your pot is performing woefully yet still incurring management fees.If you don’t wish to spend it while you can at least invest it in 1 or 2 year bonds that are guaranteed to give you a return.Managed funds are not so beware of false growth predictions.

@sextonblake4258 5 месяцев назад

Here is one reason you might CRYSTALLISE but leave invested, your max TFC. I am expecting that at some point the Government will move to reduce the TFC allowance. Maybe abolish it altogether. But the point about leaving the money in the pension wrapper to protect it from IHT is an excellent point, which is missed by many.

@slayerrocks2 2 года назад

Such a necessary video, Pete. I know too many people who hit 55 and take the cash, without even a second thought. Why save for retirement, if you spend a quarter of your pension before retirement? I have my plans and I want to build that tax-free amount as much as I can. The only issue I have is, my former employer doesn't index the DB pension in payment. They promised to, when they took over the company and scheme, but have reneged on that. As such, retirees have seen their pensions lose 12 % in real terms. I intend to negate that, somewhat. I will take the pcls, and put it into S&S ISAs. Take from them as I need, until state pension age.

@chrisb3063 2 года назад

Hold on a second.... I have a DB pension. I've been told by certain retirees that if I die while still employed.... My wife gets a 50% widows pension + my kids get half the lump sum each. However..... If I die after retirement then wife still gets 50% pension I would've received but the kids get nothing.....

@MeaningfulMoney 2 года назад

You'll need to check your scheme rules, Chris. The death in service benefits will be different from the benefits if you die after you've retired. The lump sum you talk about the kids getting is probably not the same as a pension lump sum - it'll be a kind of employer sponsored life insurance payout most likely, as part of your employee benefits.

@chrisb3063 2 года назад

@@MeaningfulMoney Yes absolutely. Thanks for this. I'm 51 & planning ahead. Great videos 😄👌

@richardw2646 2 года назад

Hi Pete, I think everything you say is true for DC pensions but in my (recently closed) DB scheme I can swap about £4k of pension for £172k of tax free cash (and still leave a DB pension of about £26k at age 60). Given that if I took the money as extra DB pension it would be taxed at 20% it seems to me it would be rude to refuse the cash as I would never live long enough to get the extra £172k. Plus if I died young my family would miss out on the tax free cash as the DB pension essentially dies with me (even if they did end up having to pay IHT).

@MeaningfulMoney 2 года назад

And that's exactly a reason to take it, Richard - looks like the maths stacks up for you!

@stiffydart1558 2 года назад

I'm in a similar position Richard. It's a no brainer. Enjoy it while you can. 😁

@harrykeogh3994 2 года назад

I'm in the same position Richard with roughly the same numbers & have come to the same conclusion. At the risk of stating the obvious, it's worth mentioning that the £172K doesn't just sit there, it can be used to generate additional income OR save on expenses (e.g. if you have an outstanding mortgage it may make more sense to pay this down than take the additional income). For me it will go towards buying a Condo in Thailand & save me the £750 pm rent I currently pay (£750 * 12 = £9K pa so giving up £4k to be able to do this without selling any of my other UK assets feels like the best thing to do) Pete: Thanks for the great videos, as many others have said would love to hear your views on why it makes sense to take the cash free lump sum.

@bobsyeruncle5557 4 месяца назад

This seems to be all down to the opinion of the advisor. Yesterday I watched a video on here where it was stated that you should ALWAYS take your tax free lump sum. Looks like you have to weigh it all up for yourself and do what you think is best.

@roberthorsford4266 2 года назад

Pete, yes I'd be interested in further discussion of tax free lump sum. No children in our case so beneficiaries irrelevant. Other than indexation of a DB pension I can't see why I wouldn't take the 25% as I can shelter that in ISAs outside the pension wrapper, the only issue being multiples of annual ISA allowances needed. But maybe multiple extractions is better than a single extraction for that reason alone.

@MeaningfulMoney 2 года назад

Watch this space, Robert. But remember, even though you can only add £20k (each) into an ISA, you could still be investing that money in a GIA and shifting it sideways to an ISA each year. At least then the money is working. But yes, by taking TFC in tranches, you could potentially increase your TFC over time.

@k0023382 2 года назад

Brilliant. Pete, going over the LTA on a SIPP and LTA charge is due to HRMC, do you have pay by using your SIPP pot (gross) or bank account (net)? I assume is the first but maybe I am wrong.

@MeaningfulMoney 2 года назад

You can choose. If you opt for ‘scheme pays’ that is, the SIPP pays then the LTA charge is 25%. If you withdraw the excess from your pension, the LTA charge is 55%. If you leave the excess in the scheme, I believe you can choose to pay the LTA charge from your own resources at 25%, but check with your accountant if this is likely to affect you.

@RichardHunterGreenwich Год назад

Just awesome. This guy should be up for an OBE, for services to the not-yet-elderly.

@MeaningfulMoney Год назад

Very kind, Richard. If you want to nominate me, I wouldn’t be averse to the idea!!!

@jacacc12 2 года назад

What about people who don't have beneficiaries and are going to leave their estate to charity ? So many different combinations, love your channel and advice is always well thought out. Have you done a video on how to find a good Independent Financial Adviser if you are not happy with the one you have now ?

@MeaningfulMoney 2 года назад

I haven't done one recently, Jackie, but I'll add it to the list for consideration, thank you!

@maltesetony9030 2 года назад

Even with a DB pension (which I have), it is not a good idea to max out on the tax free lump sum. Doing so reduces the annuity. To paraphrase what Pete is saying: "Don't grab it, just because you can!"

@MeaningfulMoney 2 года назад

I should have you write the scripts, Tony.

@haroldbetterson1877 2 года назад

Bridging from 57 with the entirety of the SIPP to a DB pension kicking in at 65 is the way

@MeaningfulMoney 2 года назад

For you, yes. Not necessarily for everyone though!

@slayerrocks2 2 года назад

Depending on your scheme. My DB is optimal at 60. The lump sum drops after that, and the annual payment stays the same.

@tancreddehauteville764 2 года назад

My small DB pension, payable as standard at 60, goes up at 8% a year plus inflation, so I intend to defer it until 75. I also have a DC pension which should hit £500k in today's money by the time I'm 60, so I'll draw down on that and take the DC at 75 alongside the deferred state pension.

@haroldbetterson1877 2 года назад

@@tancreddehauteville764 defer it until 126 c,unt

@leadixon 2 года назад

Definitely interested on when it does make sense, given I’ll likely achieve the LTA by retirement and assume that’s a good reason for doing so?

@MeaningfulMoney 2 года назад

Yes, very possibly. Watch this space!

@peterwilliams5597 2 года назад

Yes - reason to take out video would be very useful I am retiring early at the end of this year I have savings and a DB to get me to State Pension age (5 years time) I also have three DC pensions that I can combine and take as a Drawdown or UFPLS when I get to retirement age. To give me a 3 year buffer to draw from if the value of my pot falls, I was planning to take 1/3 of my tax free sum from it and put it to work elsewhere not affected (or as much) by the market place. Would this be a good compromise to leaving it in the DC?

@MeaningfulMoney 2 года назад

I can't offer advice to your specific situation here, Peter, sorry. But your'e thinking in the right way - mapping out your income and expenditure over the early years of retirement and making sure it all adds up...

@ronsalton 2 года назад

Yes please as well to reasons why you should take your tax free cash

@MeaningfulMoney 2 года назад

Noted - thank you!

@chrisemblen7812 2 года назад

Cheers for this. I'm going through this consideration for next years DB pension. The quote I have for the additional income that I'd get if I took a 12.5% PCLS rather than 25% meant my extra DB income would only pass my lower DB income plus lump sum after age 84. Does this seem a sensible way to think about it?

@MeaningfulMoney 2 года назад

Yes, definitiely. have you factored indexation into the income so it rises each year? But yes., you're definitely thinking on the right lines. Watch this space for more on this subject

@ianbrown5746 2 года назад

Hi Pete Yes please to why shouldn’t take cash.

@MeaningfulMoney 2 года назад

Watch this space, Ian!

@turnitaround7344 2 года назад

Hi Pete, wondering if you can clear something up for me please. Why does it say "Tax UK Reporting" on one of the Vanguard index funds, even tho it's in an ISA? Does that mean I have to do a self assessment on collecting or pay tax? Thanks for your time & great content 👍

@MeaningfulMoney 2 года назад

Hiya. No, don’t worry. You’ll probably find that that’s a fund which is offshore - look in the info for its ‘domicile’ and I bet you’ll find that it is Dublin. An offshore reporting fund means (simply put) that it is treated for tax like a UK-based fund, and if you hold it in an ISA there’s no tax anyway. Investors holding a non-UK reporting fund can have their gains taxed as income (higher rates) and it can all get a bit messy, so always make sure your fund is a UK reporting fund. Hope that helps!

@michaelkaliski7651 2 года назад

If you have one very large career pension fund and two or three smaller funds from earlier employment, then it may well be beneficial to take cash from the smaller pensions, after all, having a £10k lump sum in cash is a lot easier than having to save or otherwise find £10k for some urgent need. Otherwise, I would agree that in the case of index linked pensions, keep every last penny in the pension and receive a larger payment each month. Another point worth considering is your general state of health at retirement age. We would all like to think we will live forever but certain jobs and lifestyles do tend to have a relatively short period of survival after retirement. In such cases, taking a lump sum to do with as you please may be more important than looking forward to 30 or 40 years of having to live off your pension savings.

@MeaningfulMoney 2 года назад

Agree on all points, Michael!

@3thinking 4 дня назад

Reason #1 to take the full 25% asap.. Labour will abolish this very soon, saying it benefits the "wealthy" most.

@ArieteArmsRAMLITE Месяц назад

I'm a UK expat in usa for 14 years now. Just became a usa citizen. I have $30k (in pounds sterling obviously) and want to know how to get it here basically with minimum tax burden. I opted out of SERPS in 1989 and used Aviva. I just need the cash. I have all my properties paid off, rental income and no debt. Any advice welcomed.

@michaelpearson6337 2 года назад

Good advice again Pete,on a 2 to 3 hundred thousand pension pot with minimal savings, best to take tax free cash?draw an income with the state pension made up to the personal tax allowence?

@MeaningfulMoney 2 года назад

Maybe. Possibly. Couldn’t possibly say.

@nicobass1966 2 месяца назад

Thanks. but the more in the pension growing does that not mean more commision for the pension provider gets in commision or the fiannace advisor gets?. Maybe I've got it wrong, would love to see the maths on this one.

@MeaningfulMoney 2 месяца назад

In the UK, commission has been abolished on pensions and investments since 2013. But if you pay your adviser an ‘ad valorem’ or percentage-based fee, then yes, as the pension grows, so does the fee to your adviser and the pension provider. It’s up to you how you pay your adviser though - fees are agreed between you 👍🏻

@davebanks708 2 года назад

Retired 2 years ago, my wife and I have found it so much cheaper to live now not working. House paid for, all be it with a Homewise agreement. ( I would recommend looking at Homewise for any house purchase later in life). 70 now and still have not touched pension savings, except for part of the tax free cash used for our house purchase. I recommend to everyone, a range of savings going forward, ISA cash and stocks and shares, cash ( at least a years expenses), premium bonds ( we live in hope for the million but you still have the fall back to cash in,) state pension ( for us oldies SERPS was a huge help} don't forget the annuity ( took out two small annuities and really was a great move regular monthly income helps. Life is comfortable for us, but you need to plan and plan early in life.

@Chills124 2 года назад

Great advice, I am only 32 but luckily me and my partner have been investing in our ISA's from a young age whilst our friends were financing cars. Hopefully our pots will be large enough we dont have to rely on our pensions but every bit helps!

@MeaningfulMoney 2 года назад

Yes, Dave - planning and being intentional is everything!

@MeaningfulMoney 2 года назад

One day those friends will be looking at you with envious eyes...

@garyreilly1544 2 года назад

The alternate view would be a good video to watch to weigh up the pros and cons

@johnavery15 2 года назад

I was in a DB scheme. I seemed to be in a minority by opting to take the minimum lump sum and getting a higher annual pension. I retired at 54 so a higher indexed linked annual pension seemed the best option. As you said Pete I didn’t have a need for the cash and interest rates were so low.

@MeaningfulMoney 2 года назад

Sound perfect!

@MeaningfulMoney 2 года назад

Noted - watch this space!!

@simplewelshman 2 года назад

Great video. Does anyone know whether you have to take the lump sum as part of the preserved military pension at 60? I would prefer not to, and rather have increased income.

@MeaningfulMoney 2 года назад

Sorry Mark - I don't know this. Best you get hold of someone at the scheme and ask the question there

@simplewelshman 2 года назад

@@MeaningfulMoney I'm part of two Forces pensions (AFPS75 and AFPS05), apparently inverse commutation is possible in AFPA05 but not in AFPS75. Every day is a school day.

@kimhumberstone2289 2 года назад

Very helpful, but suppose I have a Defined Benefit pension, where the 'pot' is lost on death and I could invest the cash lump sum to generate a greater income that I will lose by taking the lump sum?

@MeaningfulMoney 2 года назад

Yep, that could be a reason to take it. That income would not be guaranteed though

@timwaldram5619 День назад

I will be only drawing out my DC fund’s tax free cash over many years on a flexible drawdown basis but I think the considerations are different for my work DB pension and plan to take that lump sum. This is because it seems to be a one-off offer with a DB scheme, ie if you don’t take it when you retire, you don’t get the opportunity again and, with a reasonable investment strategy, I should be able to produce an income which exceeds the lowering of the regular DB income. What are your thoughts on these differences?

@dubsdolby9437 Год назад

If you take dividends from your sipp but do not touch the actual pot, are they tax-free ? As they are paid as cash and sit separately from the main investment.

@henryalex1597 2 года назад

How do you access the podcasts?

@MeaningfulMoney 2 года назад

Like you would any podcast, Henry. So you can use any podcasts app on your phone and search for Meaningful Money. Or you can go here: meaningfulmoney.tv/mmpodcast/ - enjoy!

@vinay4886 2 года назад

Another reason at present is the recent market downturn, so those who are liquidating shares from a SIPP account are crystallising a loss..

@MeaningfulMoney 2 года назад

Maybe - depends on when they started investing and what they bought their shares at! But yes, it might make sense to delay taking tax-free cash in particularly volatile market conditions. Though bear in mind that the cash could easily be invested again...

@grahamlewis6777 2 года назад

Yes also agree that a videos on why you should take 25% tax free is a good idea. I may move to a country with no such benefit (Aus.) so under my circumstances is it sensible to take it out? An investment of that cash in equity would still be subject to cbt I think.

@MeaningfulMoney 2 года назад

I did that video here, Graham: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-iTTOzX8dAGA.html Your specific question about taking the cash and moving to Australia is a bit out of my area, so I’ll pass on that one!

@chriscarey1879 2 года назад

Ha, I wish I had similar amounts to my pension pot in bank accounts premium bonds etc🤣. Like you said, I think you should make the other video because the first use you said for cash was to spend......maybe a reward for 40+ years of working.

@MeaningfulMoney 2 года назад

I’ve made the follow-up video already, Chris! ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-iTTOzX8dAGA.html

@concalma75 Год назад

Hi Pete. Wouldn't it make sense for me to take my tax free cash: I was above the LTA so can now only take the 25% of the old LTA (assuming there is no market crash before I retire in 2025!). If I take my PCLS I will invest that money and any capital gain is likely to be taxed at 10% and dividends at 8.75%. I will be taking about £30k PA out of the remaining pension, so will be liable for income tax at 20%. Since the highest of these tax rates is 20%, I would appear to be better off investing the PCLS money outside my pension (including using my £20k per year ISA allowance). Do you agree? Many thanks.

@philattlee1 2 года назад

It depends on your circumstances but i'd say take the money. My wife took her tax free lump sum when she was 62 and in very good health. She died suddenly 5 years later. All that sum would have been lost under the terms of her pension. You don't know how much time you have. i'd always take the money and make my own decisions.

@MeaningfulMoney 2 года назад

I’m sorry for your loss, Phil 😞. But yes, that is an argument for taking your tax-free cash, definitely.

@trevorthomas2373 23 дня назад

It is the best argument for taking the lump sum. I have seen this happen all to often. I took my lump sum, invested it and drew off it when needed. Remember the old adage, you never know what’s round the corner.

@aficio698 2 года назад

Rightly or otherwise I took my 25% tax free and put into my self build house. Another investment vehicle and as my principal home free of CGT. No family to leave pension too, spend it b4 I exit.

@MeaningfulMoney 2 года назад

Sounds great! One of my ambitions to do a self-build!

@toysforthetoygod2671 2 года назад

Uncle! I have found you at last!

@chapman9230 2 года назад

I like the thought of sitting on an enormous pile of cash. I wonder how high 250 k would make me.

@garymathison8361 2 года назад

Hi Pete, if not taking a PCLS from a DC pension and only wish to access it for additional income as and when required how can you still benefit from the tax free allowance. Are you left with UFPLUS or phased drawdown? Are there other options to consider?

@MeaningfulMoney 2 года назад

Probably UFPLS is your best option there. Anything you crystallise and choose not to take PCLS from, your chance to take PCLS in future has gone. Only at the point of crystallisation san you take it.

@Wiltshire-observer 2 года назад

Well, it really depends doesn’t it ?!. If you don’t have much in savings but want a fund for holidays whilst you are still healthy, you would take the tax free amount, assuming you can live on the smaller income left. If you have other pension pots, that will keep you in reasonable income, then tax free amount from one pot (the smallest one) also is a reasonable idea. The balance is having enough income but minimising your tax liability. The wealthier you are, the more likely it is that you will grab the tax free lump. The dire returns on annuities right now has driven up the tax free withdrawals. You would need to live about 30 years in retirement to return your money from an annuity investment. Safe investment of your 75% remaining funds in a drawdown will only provide a very small return right now. If you are risk adverse (remember the world isn’t as safe as it was last few months) your safe pension fund would probably do better in premium bonds, such is the low returns.

@MeaningfulMoney 2 года назад

Yep. “It depends” is exactly right. Stay tuned for a video on reasons why you should take your tax-free cash shortly. I’d disagree with some of your points. The wealthier you are, the less likely you are to take money out of a pension fund, simply because you’d be making an inheritance tax position worse. You’re right that annuities are low-return, but for some the guarantees are worth it. I’d also disagree with your assessment that drawdown plans are low return. That depends on the underlying investments. While things are volatile right now, most drawdown funds will be invested for decades, so short-term market shenanigans are irrelevant. And so we come back to your first thought: it depends, and that’s exactly right. It depends on your health, risk profile, understanding of markets and tolerance for their vagaries, capacity for loss and short-term spending needs. Everyone has to find the best solution for their unique circumstances - that’s the challenge, but hopefully my offerings here provide some food for thought.

@leesteggles6367 Год назад

Some of us had to take out our lump sums. I had no choice over covid. Lost my job. Can't get support from the country I've paid into.

@ryanjackson4597 2 года назад

You forgot the 4th reason… money can provide security and peace of mind…. Which for some is priceless.

@MeaningfulMoney 2 года назад

It is - a bird in the hand etc etc....

@GingerBoy1974 2 года назад

Yespkeasewouod be great to see why you should take tax free pension

@MeaningfulMoney 2 года назад

Noted - cheers!

@slayerrocks2 2 года назад

This video, with the upcoming one in mind, seems like a good place to ask this question again. I intend to retire at 60. I can take my DB as early as 55. Would it make sense to do this and put an equal amount into my company scheme? It reduces the amount paid from the DB, but really boosts the DC. As I mentioned before, the DB isn't indexed once in payment, and is losing pace, for the pensioners who are in receipt.

@MeaningfulMoney 2 года назад

HI slayerrocks2 - really sorry, but I can't comment on individual options or what you 'should' do. That would constitute advice and this isn't the place for that, sorry.

@slayerrocks2 2 года назад

@@MeaningfulMoney fair enough Pete. Thanks for the reply.

@jtunnicliffe7335 Год назад

doesn't make sense to me - if i have a DB pension it makes sense to be to take 25% tax free and investing that - the capital becomes tax free whereas if left in the DB scheme it will all be paid out as taxable income