Should I take large tax-free cash from a hybrid pension?

It's another varied mix of questions, with a couple on catching up after a late start, avoiding the 60% tax trap and lots more.

Shownotes: https://meaningfulmoney.tv/QA30 

01:03  Question 1

Hi,

I'm curious if you have advice, best practice or tools to advise people who have a reasonable rental property portfolio on how to plan for retirement?

I am 55, have taken 50k tax free cash, and 13k a year drawdown, approx 40k left.  I have 11 rental properties, but I am still remortgaging and buying more properties.  Currently have about 450k available to reinvest into a few more properties, and then probably stop buying.

I'm really struggling to understand how much I can/should have available to spend each month, especially as I'm still reinvesting into properties.  I'm sure I should be spending way more than I am, but can't work out how best to put a retirement plan together to show how much I truly afford to spend each month.

Love your content, and thanks for any advice you may be able to give.

Thanks, Paul

09:49  Question 2

Hi Pete and Rog.

Big fan of the podcast, keep up the good work. I am looking at ways to stay under 100k income each year to remain eligible for childcare benefits. I know if I were to make AVC into my work pension this would help to remain below that figure. I would prefer to put this money into a SIPP. My question is if I got paid the money and deposited it into a SIPP instead of my work pension will this reduce my income tax and prevent me from going over 100k and losing childcare benefits.

Kind regards, Joshua

12:33  Question 3

Hello Pete and Roger,

Firstly, thank you so much for such an informative podcast. I don't think I listen to a single episode without taking away something valuable!

My question relates to what I should do to with money as I accumulate it for the next financial year's ISA and SIPP allowance.

For context- I am 39, an NHS doctor with an NHS pension, have a paid off mortgage and have started making SIPP contributions to bring my adjusted net income below the 60% tax threshold. I am in the privileged position to be able to contribute maximum S&S ISA contributions at the beginning of each tax year and already have filled premium bonds allowance as my emergency fund.

Should I put my accumulating savings in a high interest savings account until April, or am I missing out on growth each year and should I be using a GIA with a bed and ISA approach? I appreciate there may be tax on savings interest above £500 or CGT on anything over £3k gains.

I just don't want to be missing out on the best approach for the next 20+ years as I hopefully continue to max out ISA and pension contributions.

Thank you so much in advance and keep up the fantastic work!

Paddy

16:36  Question 4

Dear Pete and Rodge,

I am relatively young (36) and have started listening to your podcast relatively recently (in the last year). What I like about it best is the calming relaxed attitude that money matters are discussed in and the comforting belief that life is more important than money I think shines through.

Comparison is the thief of joy I know but I find it hard to situate myself in relation to where I 'should' be financially. I stayed at university a long time (10years) and so always perceived of myself as 'in debt' and living to the brink of my means, I didn't have a credit card but I would spent all my money and save nothing. When I did eventually get a job it didn't pay much and again it was paycheck to paycheck for many years.

Then came three big changes almost at once. First me and my wife had a baby daughter come along, next the company I worked for went bust and third I found your podcast!

Something about the mix of these three made me sit up, take notice and want to engage with my finances where previously my head had been in the sand. I did very much feel like I was way behind the running. I managed to find a job which paid almost a third as much take home pay again and decided to set up savings for my daughter, set up an emergency fund, increase pensions contributions, open a stocks and shares ISA, all of the good stuff that you guys continually discuss.

However, I still am very much of the opinion that I am way behind the game and starting late which is a shame seeing as time is such a valuable component in investing. My question to you guys is, were you in my position, where would be the first places you would look to educate yourselves on the right things to do next? I feel like I don't know what I don't know and things continually surprise me (for instance I didn't realise that having a car on finance was considered bad debt until the other day). I have this constant nagging doubt that I will be missing something because I haven't started from the beginning. I did consider going back to the start of the podcast when I found it, but Rodge wasn't even around in the first few so I didn't enjoy it as much and also felt like maybe some advice would have gone out of date? Is there a key place for me to start, non-negotiable sources I have to get to grips with in the first place that you can direct me to? What would you do?

Very keen to learn your thoughts and hugely appreciative of all your efforts!

Kind regards, Dan

24:16  Question 5

Hello Pete & Roger

I've gained Incalculable value from listening to you so keep up the amazing work!

I have a DB-DC hybrid scheme and at my target retirement age (64) my projections say I'll have £33K p.a DB income + £345K DC pot. This would give me ~ £86K TFC allowance at the pot.

My plan has been not to take any TFC on the DC pot upfront and to use regular UFPLS withdrawals to reduce income tax over the long term.

However, as this is a hybrid scheme, if I take both DB and DC components at the same time I can keep the DB at £33K p.a. and take £220K TFC upfront.

This has made me question my slow TFC strategy as I can realise far more taking it upfront by leveraging the DB 'value' but only at that point in time.

My thoughts are to then find a way to get this £220K TFC into S&S ISAs where they would be invested in the same way as in my DC pension.

This would allow me to reduce income tax massively over my lifetime. This seems too good to be true! Is it?

Problem will be finding a home for such large amounts of cash

Options

Max mine and wifes ISA allowances (£40K p.a)

£10K p.a. contribution  to mine and wifes DC pots  (MPAA limited) (£20K p.a.)

Any other options?

Thanks, Duncan

28:46  Question 6

Greetings Pete and Roger,

Speaking as a fellow Gen X gruff Northerner (…Pete!), I'd just like to express my huge gratitude to you both for rescuing me from years of financial ineptitude, misdirection and investing ignorance.

I can only blame myself, but losing a parent in my late teens, then late 20s, and subsequently finding myself on the non-receiving end of 'Sideways disinheritance' (Dad remarried / mirrored will / sold our family home to pay second wife's debts….) didn't help with establishing good long-term financial habits.

Thankfully, the financial clouds parted 21(ish) months ago when I discovered your excellent Youtube videos, first book, and podcast back catalogue, including a tour de force in 'tough love' re: DC pension catch up.  Since then, I've been desperately trying to catch up, with a rough target of getting a DC pot to support an UFPLS annual 3.5 - 4% withdrawal of, the magic, £16,760.

Starting from a very low base, I've been using direct payments from my own Limited Company into a Vanguard SIPP, approximately £3k+ per month (yes, I'm living on lentils..) combined with transferring personal contributions of £10k from money sat in a S&S ISA, thereby getting tax relief up to my small wage of £12.5k.  Using this mechanism, I've placed £48k into the pension (mindful of the £60k limit – tax relief is added on the 10k personal, but 19% corp. tax is saved on the employer contributions) in the last financial year, but won't be able to sustain this forever.

My question is as follows – provided I still make a net profit after the Employer pension contributions, am I correct in assuming I'm ok re: the 'Wholly and exclusively' HMRC test?  The employer pension payments dwarf the remaining net profit, from which I then take a small amount of dividends, and a smaller corporation tax payment is made at 19%.

Also, provided I don't transgress the personal earnings limit (£12,570 for me), is that ok also re: also putting in from the employee side?

Am I missing anything at all?  E.g. could you use the 'carry-forward rule' to top up previous years with employer contributions from the Limited company?  I'm assuming the answer is 'no', as dividends don't count as earnings / they don't exceed £60k, but thought I'd ask anyway!

Apologies for the 'War and Peace' length question, and thanks again.

Stay intentional, Bill PS: Really like the 'Catching up' section of your, also excellent, second book Pete.