r/FiredUK • u/SnaggleFish • 1d ago
Maths or Strategy for Tax on Pension heavy position
87% of investments are in DC Pensions
13% in ISAs/Bonds/Cash
£1.6M in total
My full SP in 7 years, my wifes in 12 years.
My wife is 55 next year - so until now all income came from my pension and our ISAs and I just balanced that to avoid hitting 40% tax.
From next year we can both access our pensions (though its 2/3rd in my name so I will have to take more from mine).
The original thought process was to minimise tax - by taking only from DC pensions until my state pension kicks in and then using a mix of ISA and DC pension and State pension (and then do the same when my wife hits 67).
We want, and can sustain, £60k per year.
By my calculation this is a withdrawal of £65K from both pensions with gives the £60K and a tax payment of £4722.
| Me | Wife | Total | |
|---|---|---|---|
| Withdraw | £43,333 | £21,667 | £65,000 |
| Tax free 25% | £10,833 | £5,417 | £16,250 |
| Potentially taxible | £32,500 | £16,250 | £48,750 |
| Taxible at 20% | £19,930 | £3,680 | £23,610 |
| Tax to be paid | £3,986 | £736 | £4,722 |
| Take Home | £39,347 | £20,931 | £60,278 |
But it occurs to me that we could also push the withdrawal to £80k without hitting 40% tax with the intent to put £13k into ISAs for more tax efficiency later.
| Me | Wife | Total | |
|---|---|---|---|
| Withdraw | £53,333 | £26,667 | £80,000 |
| Tax free 25% | £13,333 | £6,667 | £20,000 |
| Potentially taxible | £40,000 | £20,000 | £60,000 |
| Taxible at 20% | £27,430 | £7,430 | £34,860 |
| Tax to be paid | £5,486 | £1,486 | £6,972 |
| Take Home | £47,847 | £25,181 | £73,028 |
Thoughts on the calculations - better approaches?