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What would you do?

Discussion in 'Retirement' started by semolina29, Oct 1, 2020.

  1. semolina29

    semolina29 New commenter

    I know there is some great advice on here so all comments welcomed. Some of you will already have seen my dilemmas! I've left teaching at 56 with 33 years pension and secured another full time job which will keep me busy and cover the bills ( not what I was earning but not the workload either! ) My question is whether I should draw my pension now and enjoy the benefits or hold off for less ARB . I'd always thought it was better not to take the pension but I'm wondering whether to take the pension and enjoy the extra money each month . Still have a mortgage so this would help to get the last bits of debt and mortgage paid off before I stop working ....and would make my pension and lump sum go further .
    Go on....tell em what you think!
  2. emerald52

    emerald52 Star commenter

    If you need the money take the pension. If you can manage without then hold off.
    Prim likes this.
  3. Bedlam3

    Bedlam3 Star commenter

    As you now have a new full time job would your salary plus your pension push you into the 40% tax bracket?
  4. semolina29

    semolina29 New commenter

    Not by my calculations....just under
  5. diddydave

    diddydave Lead commenter

    I'm sure you've seen many of my posts already particularly the AAB comparison sheet: https://docs.google.com/spreadsheets/d/1MmQ1h1AwCoC5IggRdVai4L0aBu5j0subZHCkVe3JNOw/edit?usp=sharing

    One thing to consider with regard to this sheet is the effect income tax has upon it.
    The sheet ignores this as it stands, and so is accurate if all your income is taxed (such as in the situation you describe where you have income greater than the personal tax allowance of £12,500 a year already), however you situation has given me a new scenario to consider - one where the only income is the pension, the case for most pensioners.

    In this case once the pension rises above the personal tax allowance the 'extra' you are getting is only worth 80% of its value. This would mean that, for those whose only income is their pension that is over £12,500, it would take a bit longer to catch up.

    Back to your situation. I'd suggest:

    1) Work out the exact figures (under the proposed changes for both options)
    2) Don't panic. If you don't take it yet and an emergency happens it will only take 6 weeks to get it.
    3) Consider how you are going to use the lump sum. Inflation will very quickly erode its value unless you can find a use or investment that beats inflation.
    4) Get proper financial advice, particularly if you are going to take it and increase your other pension payments (for anyone who was to be pushed into the 40% bracket this could be one way to reduce the overall tax bill - but there are some rules on doing this)
  6. pauljoecoe

    pauljoecoe Occasional commenter

    If you took the pension I would certainly pay off the mortgage or any other debts as a priority. However I would consider that you will be paying more in Tax than you would if you waited until you weren't working

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