Welcome to another Q&A show - this week we cover tax free cash from DB pensions, annuities vs drawdown and whether you should pay down a buy to let mortgage or invest. Plus quite a bit more!
Shownotes: https://meaningfulmoney.tv/QA9
Questions
00:41 Question 1 Hi Pete and Roger. Thanks for your wisdom over the years. My question came about from an answer you gave on a previous Q&A about AVCs and tax free cash. You mentioned it was possible (sometimes) to use AVCs as tax free cash to preserve the maximum DB benefit. I have some follow up questions that relate to - A small DB pension that doesn’t appear to offer tax free cash. - A small DB pension that does offer tax free cash, but I have left that job so can no longer contribute to that pension (AVCs or otherwise) I don’t have AVCs in these pensions, but I do have a DC pot separately. Would I be able to use take tax free money from my DC pension if I took it at the same time I took the DB pension sort of in lieu of the tax free component of my overall pension?
I suspect this is clutching at straws, but thought it worth checking. Many thanks. Loyal listener, Mark
03:11 Question 2
Hi Pete & Roger! I hail from Northern Ireland and enjoy your Podcast to keep my mind active and up to date in all things financial - Top job. I have been looking at having a go at Voyant after various spreadsheets of my own as a way to play with the numbers so was considering a meaningful academy course - question is which course is right for me? I am in mid 40's and financially secure so in theory wealth all ready built? Mortgage paid, multiple residential and commercial properties owned debt free and an sizeable equity portfolio and so should I be looking at the retirement or wealth course? John
05:30 Question 3 Great podcast and been an avid listener for the last year. I have a question which, I think I know the answer but I'd be curious on your perspective.
Background: - I divorced in 2021 and as part of that agreed to transfer the house over to my ex-wife and a charge put on the deeds so that when it's sold I'm owed a percentage of the sale. - The house going on the market will be (or should be) triggered when my youngest son reaches 18 or leaves full-time education. This will be either 2028 or 2031. - Since the divorce I've been able to purchase another house and this is my permanent residence.
I'm a higher rate tax payer, and when that ex-marital home is sold I'd expect to get somewhere around £200k. However I won't actually need that to hit my retirement goals and would prefer to pass that onto my 3 kids.
Could you please discuss options on how I might do that in the most tax efficient way. Best Regards, Dave
10:38 Question 4 Hello Pete & Rog,
I stumbled across the show a month ago and have been "binge listening" since then, its amazing, where have you been all my life, keep it up guys. I am actively preaching the Gospel according to Pete to all and sundry.
I am a 61 years old Veteran in receipt of a Military (DB) pension to the amount of £18k per annum, which is index linked to CPI. Additional to this, I have a moderate private pension to the amount of £150k which I contribute £500 per month, it has an approx growth of circa 15%
I also have a small Stocks and Shares ISA, valued at £15k which I contribute a minimum of £250 per month, this is also growing at approx 14% pa. I am currently working and contributing the minimum amount into a work placed pension with NEST.
I am planning to look at retirement at either my next birthday in October 25 (62yrs old) or continue until 65 as I am enjoying work. I have deliberately avoiding factoring in my wife as she is a senior manager within the public sector and has a good DB scheme Final/Average earnings Pension.
My question is pension related and I have a dilemma as to decide between either an Annuity to boost my Mil Pension or veer towards a form of drawdown option at a higher rate until SPA and then look to reduce down withdrawals in order to be tax efficient and make it last longer?
I am debt free with mortgage paid off and only real major expense is a holiday account which we both contribute to as we like luxury holidays, I hear Rog saying "spend it now". No plans to put anything towards estate planning as both sons are very successful and they will probably inherit our home in time.
Just looking for some guidance on what feels may be the right decision under the circumstances, keep up the great work guys, love the show. Michael
16:34 Question 5 Dear Pete & Rog,
I have a pensions Annual Allowance query, the answer to which might be of interest to the MeMo community.
A relative uses salary sacrifice for her occupational DC pension scheme, and the employer contributes £40k, annually, into her plan.
Normally, she doesn’t make any personal contributions into any pension schemes, but after receiving a windfall, she is minded to do so via a newly opened SIPP — she has rejected the option of increasing her salary sacrifice amount, and wishes to contribute part of her windfall separately from her occupational DC scheme.
Her (post-sacrifice) relevant UK earnings are £35k, so she is planning to contribute £20k gross into the SIPP (£16k net); in order to consume the full Annual Allowance limit of £60k [£40k (employer) + £20k (personal)].
The SIPP provider has advised her that she can actually contribute the whole £35k (gross) by using ‘carry forward’; as she hasn’t made any personal contributions in previous years [she’s only ever used salary sacrifice].
Is the SIPP provider correct?
Kind Regards,
James
18:15 Question 6 Husband and I are in our late 50's. We have a £30k interest only mortgage on our home, with £350k of interest only mortgages on 3 buy to let's.
Husband has £350k in personal pension and I have a civil service pension (I have taken my final salary element of civil service pension).
My B2L' s give £2300 income per month against associated costs of £1100 per month.
My question is around reducing our borrowing versus investing in stocks and shares ISA. I have been comfortable in having my buy to let's on interest only mortgages but I am now questioning my approach. We are intending holding at least 2 of the 3 properties throughout our retirement. I am thinking of using the next 5 years to position ourselves for our retirement. I could start to invest £500 into a stocks and shares ISA or I could pay down the mortgages. I am torn between approaches and would value your input on this.
I have only just discovered your podcast and it is now a weekly listen for me.
I hope I have explained this fully and look forward to hearing your views. Helen.
The Meaningful Money Personal Finance Podcast