Money thoughts …

[Tysonator]

I see what you mean. Though as they seem to introduce a new product every year.....I surmise it should be possible to transfer in to the next 'fixed' 12 month ISA ?

The one thing I am unclear about? When you transfer an ISA to the new 12 month higher interest one.....can you only transfer the max £20k appropriate to the tax year or can you transfer the whole amount if above £20k ?

You can transfer in the whole balance.
The 20k is a yearly allowance you have.

 

[onomatopoeia]

Just a very basic pension question, based on a random thought.

If you have a pension, lets say for easy maths its worth 200k at retirement age (65) - The plan says something like you can take out 50k and then get 10k a year, or take nothing and get 15k a year. What happens about when you die? So suppose you die at 66 having only taken out 15k for that year - what happens to it? Likewise, what if you live for another 30 years - that's 450k due at 15k a year but your pot is only 200k?

Assuming this is money / investments in a SIPP or other defined contribution pension (rather than a defined benefit, aka "final salary" scheme) then I've been looking into this for my own pension pots ..

You can take 25% out tax free, either all at once or have 25% of each withdrawal exempt from tax. Let's say you take your 25% and have 150k left. You can then either take it out a bit at a time as you need, so the pot dwindles but there might be some left when you die (potentially a lot if you die at 66) or you can buy an annuity. If you leave it in the pot, the pension provider should allow you to nominate who this goes to (HL and Creative where my pensions are both allow you to do this, a couple of my friends are going to get a surprise when I die) and the recipient will get it tax free if you are under a maximum age (75 I think) when you die. It isn't part of your estate for IHT purposes, to my understanding.

Alternatively you can use that 150k (or some part of it) to buy an annuity which will pay out a certain amount each month until you die. If you die age 66 that's good for the annuity provider as they've got a lot from you and paid little, if you die age 106 it's good for you as you've had 40 years of payments for the same purchase price. There is no capital to be inherited in this case as you've spent it on the annuity. It's a gamble, but it means you know you will have income while you live.

 

[Box Brownie]

Assuming this is money / investments in a SIPP or other defined contribution pension (rather than a defined benefit, aka "final salary" scheme) then I've been looking into this for my own pension pots ..

You can take 25% out tax free, either all at once or have 25% of each withdrawal exempt from tax. Let's say you take your 25% and have 150k left. You can then either take it out a bit at a time as you need, so the pot dwindles but there might be some left when you die (potentially a lot if you die at 66) or you can buy an annuity. If you leave it in the pot, the pension provider should allow you to nominate who this goes to (HL and Creative where my pensions are both allow you to do this, a couple of my friends are going to get a surprise when I die) and the recipient will get it tax free if you are under a maximum age (75 I think) when you die. It isn't part of your estate for IHT purposes, to my understanding.

Alternatively you can use that 150k (or some part of it) to buy an annuity which will pay out a certain amount each month until you die. If you die age 66 that's good for the annuity provider as they've got a lot from you and paid little, if you die age 106 it's good for you as you've had 40 years of payments for the same purchase price. There is no capital to be inherited in this case as you've spent it on the annuity. It's a gamble, but it means you know you will have income while you live.

Emboldened above and broadly what I posted previously
Here post #306

Money thoughts …

I have really thought about buying PB's ! How much does one have to invest to say £20 per month ( average over a year ) ? If you mean what holding you would need to return you £20 per month in winnings, going off my average over the last few years, a holding of £8,000 would do it. Although you...

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However, my understanding was/is slightly different to what you say above....as follows...:-

To get your up to 25% Tax free money you need to crystallise the pension pot though it doesn't need to be the whole pot i.e. you can leave a portion uncrystallised leaving you the option (if needed to take another 'up to 25%') This what I have done to keep my options as open as practically possible.

But of note, the crystallised portion is now 'committed to be used', though only when ready, to be made into either a 'drawdown pension' (where if not careful you can run out of money before you die) or an Annuity Pension.
However, you can do both i.e. have an Annuity from some of the crystallised pot and a drawdown from the rest but whatever type of pension you have the income will be taxable.
Leaving any uncrystallised remainder for other decisions.

NB an Annuity once 'bought' cannot be undone....likewise, once the "Drawdown Pension" has been setup you cannot undo it. However, the drawdown pension is under your control i.e. you can draw as needed or simply leave untouched and should (given favourable stock market conditions...............which they have not been since Russia invaded Ukraine ) grow

Something to bear in mind with a Drawdown Pension is that in an ideal world you should not draw more than the fund is growing e.g. if it is growing @4% then only draw say 3%
To do otherwise means that you are eroding the capital but nothing wrong with that other than the money available is continually reducing and might expose you to simply running out of money! One might say that you would ideally run out of money on the day you die

Though simple, there is complexity and that is why an IFA is important to not only help you manage (yes some folk do it themselves) your retirement pot investment(s) and also to guide you through the choices available with regard to which method of pension is right for you.

Note ~ Annity rates have been dire for some time and so far have not looked particularly attractive. Having said that if you have a life impacting medical history or problem then medically enhanced annuities do exist.