Maximising pension withdrawals at 20%

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Roro999

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Does it ever make sense to do this ? Both retired aged early 60's. Combined gross income of €50k. Combined pension pots €350k. So scope to withdraw up to €30k p.a over 11 to 12 years at lower tax rate. Pot's exhausted by ages 76 and 72. e.g of reasons, finished with travelling really at that stage and could help the kids along or put towards other cash to buy a downsized size. At 76 and 72 have the state pensions and one public service pension of approx 15k plus PPR only no mortgage. Can live very simply really and rent a room scheme perhaps if required. Madness or any opinions welcome.
 
Where is the €50k p.a. coming from?
Does the couple actually need €80k p.a.?
 
50k comes from
Invalidity Pension 12k x 2
4% drawdown on 350k pot
Public service pension 12k

Couple can live on 42k net p.a
 
Yes this is absolutely a great strategy where you have some guaranteed benefits and an additional pension pot - life isn't a dress rehearsal and there are no prizes for being the richest person in the graveyard

Expenditure in retirement declines by around 1 to 2%pa in general so more now rather than later makes a lot of sense for some people

Taking income at 20% tax and giving away via annual 3k pa gift means family potentially only pays 20% tax on gifts/inheritances rather than 33%

Marc Westlake CFP, TEP, APFS, QFA, EFP
Chartered, Certified and European Financial Planner
Registered Trust & Estate Practitioner
Everlake
 
Marc said:
Yes this is absolutely a great strategy where you have some guaranteed benefits and an additional pension pot - life isn't a dress rehearsal and there are no prizes for being the richest person in the graveyard

Expenditure in retirement declines by around 1 to 2%pa in general so more now rather than later makes a lot of sense for some people

Taking income at 20% tax and giving away via annual 3k pa gift means family potentially only pays 20% tax on gifts/inheritances rather than 33%

Marc Westlake CFP, TEP, APFS, QFA, EFP
Chartered, Certified and European Financial Planner
Registered Trust & Estate Practitioner
Everlake
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Thanks Marc. But does it make sense in the following scenario.

Couple have 5 children that could be helped out to a degree over next 10 to 12 years.

Total assets of the couple are:

Cash available 300k
PPR value 500k ( no mortgage)
Pension pots 350k

If both were to leave all equally to 5 kids they would each receive under the inheritance tax threshold .
 
Roro999 said:
Thanks Marc. But does it make sense in the following scenario.

Couple have 5 children that could be helped out to a degree over next 10 to 12 years.

Total assets of the couple are:

Cash available 300k
PPR value 500k ( no mortgage)
Pension pots 350k

If both were to leave all equally to 5 kids they would each receive under the inheritance tax threshold .
Click to expand...
You currently have combined exemptions for the children of €1.675M so unlikely to be any inheritance tax under the current rules.
So you are down to the income tax and time value of money arguments.

Ask the children if they would prefer say 3kpa each now or €230k each in 20 years time and I'd guess most people will take the first option. * Unless they are in spectacularly well-paid jobs themselves.

Your logic about the 20% tax band and having slightly more now vs later still holds good

You really need to model this in a planning tool and see the implications of each option
 
You are highly unlikely to be in a position to have any tax free pension income. So using your full 20% band now could avoid a future position where you have a very large pension fund and need large funds for a family member, and are forced into the 40% tax band.
 
S class said:
You are highly unlikely to be in a position to have any tax free pension income. So using your full 20% band now could avoid a future position where you have a very large pension fund and need large funds for a family member, and are forced into the 40% tax band.
Click to expand...
Thanks. Will never have a very large pension fund. Combined now is €350k and retired.
 
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