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Declaring Victory and moving on

Including Financial Independence and Retiring Early (FIRE)
TUK020
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Declaring Victory and moving on

#425148

Postby TUK020 » July 6th, 2021, 8:51 am

Last week, I handed over as MD of the small company I have run for the past 7 years. The experience has been fun and rewarding, but not without stress. I still have a couple of days to attend at the end of the month for loose ends, but at the end of the month I get a P45 and my last proper salary cheque. I have recently turned 60, and want to spend more time attending to my own health and fitness. As I explain below, the financial incentive to continue has been severely blunted.

Strategy for harvesting income
I shall be taking my DB pension from the start of the next tax year (roughly coincides with my next birthday), and in the interim paying myself out of my accumulated cash float.

The intent is that between now and 67 I should be able to harvest enough natural income from my SIPP (perhaps topped up with one or two capital disposals) to bridge the gap between my DB and the higher rate tax threshold*. Thereafter this would be much reduced once the state pension (full entitlement) is included. At this point my intent is to leave the SIPP largely alone as a safety buffer and also as an inheritance tax avoidance mechanism. Need to update my will so this gets left to my kids.

My SIPP represents about 60% of my portfolio. The other 40% being in my ISA. I view income from my ISA as being "top up money" for holidays, support getting kids independent etc to be tapped as needed, and I will probably switch from reinvestment of dividends to just accumulating the cash. The capital value of my ISA represents my "care home fund" for later years.

We have a large house, and a retinue of youngsters in it. The first two (daughter and s-i-l) moved out last week. Another daughter to follow in the next few months. The last remaining two will be gone in the next 2 years, at which point we can downsize, and my wife can stop working as well (she is younger, and her DB pension is not accessible until later).

Although I feel more emotionally secure with the idea of "not selling, and living off natural yield" than "look for TR, and sell what is necessary", the reality is that my drawdown strategy is driven primarily by tax thresholds - hoover what I can out of my SIPP tax efficiently, and stuff any surplus back into my ISA.

As a side note, I am in the interesting position that I suspect a lot of GPs, Hospital consultants, Professionals are. I am going to get hit by the LTA, so it does not make any sense to defer taking my DB pension any longer. Unless I am happy paying a marginal tax rate of 65% (actually something closer to 80% if one takes into account withdrawal of personal allowances), this means any further professional career work is uneconomic. Some would view this as a quality problem to have. I am dismayed that HMRC has in effect got rates/allowances to create punitive levels that discourage work and paying of tax. The country can ill afford to do this.

* I have an interview coming up for a part time lecturing job at the local tech college. If this works out, and is enjoyable, then this postpones me drawing on the SIPP. The money is not a motivation for doing this.

Lootman
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Re: Declaring Victory and moving on

#425154

Postby Lootman » July 6th, 2021, 9:14 am

TUK020 wrote:I am in the interesting position that I suspect a lot of GPs, Hospital consultants, Professionals are. I am going to get hit by the LTA, so it does not make any sense to defer taking my DB pension any longer. Unless I am happy paying a marginal tax rate of 65% (actually something closer to 80% if one takes into account withdrawal of personal allowances), this means any further professional career work is uneconomic. Some would view this as a quality problem to have. I am dismayed that HMRC has in effect got rates/allowances to create punitive levels that discourage work and paying of tax. The country can ill afford to do this.

Perhaps that situation is bad for the country, but it doesn't have to be bad for you. It means you can not work without feeling in any way guilty or, worse, useless.

I retired nearly 20 years ago, after 25 years of non-stop full-time work. Initially I thought I would do this job part-time and that job part-time. I was also still a landlord for the first ten or so years of retirement although was gradually winding that down. These days I do not feel any need to fill days and hours with work, make work or busy work, and have learned to enjoy doing (at times) very little. It depends a lot on whether you are content with your own company and do not feel a need to fill up the time. People ask me if I am bored and I reply "never"- I am only bored when I am doing something I don't want to do and that rarely happens these days.

Given the tax code deters you from productive work then I would simply embrace that and take it as a sign that you have served your time and have no need to prove anything to anyone else. Long may you fritter away time pleasurably.

swill453
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Re: Declaring Victory and moving on

#425155

Postby swill453 » July 6th, 2021, 9:17 am

It's not your will that determines who gets your SIPP when you die, it's your Expression of Wishes that you lodge with the provider.

Scott.

Dod101
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Re: Declaring Victory and moving on

#425157

Postby Dod101 » July 6th, 2021, 9:29 am

swill453 wrote:It's not your will that determines who gets your SIPP when you die, it's your Expression of Wishes that you lodge with the provider.

Scott.


Just to be pedantic. Normally that is the case. The OP should check with his SIPP provider that it falls outside of his estate and within the pension rules. If so, he should then lodge an Expression of Wishes with his provider.

Dod

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Re: Declaring Victory and moving on

#425284

Postby Kantwebefriends » July 6th, 2021, 5:54 pm

"I am going to get hit by the LTA"

What can you do to minimise that? Would starting the DB earlier help? An actuarial reduction would drop the valuation of the pension. Would commutation help? Does your scheme allow Allocation, whereby you give up some pension so that your widow gets a bigger one?

How about the DC pension? Withdraw the tax-fee lump sum PDQ?
Added to those, you could hold your return-seeking investment (equities, mainly) in your ISAs and your risk-reducing investments (bonds) in your SIPP.

On the other hand if we do have a great market crash in the near future, will the LTA matter to you at all?

TUK020
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Re: Declaring Victory and moving on

#425405

Postby TUK020 » July 7th, 2021, 6:52 am

Kantwebefriends wrote:"I am going to get hit by the LTA"

What can you do to minimise that? Would starting the DB earlier help? An actuarial reduction would drop the valuation of the pension. Would commutation help? Does your scheme allow Allocation, whereby you give up some pension so that your widow gets a bigger one?

How about the DC pension? Withdraw the tax-fee lump sum PDQ?
Added to those, you could hold your return-seeking investment (equities, mainly) in your ISAs and your risk-reducing investments (bonds) in your SIPP.

On the other hand if we do have a great market crash in the near future, will the LTA matter to you at all?


In effect, I am taking my DB scheme from my next birthday, i.e. the next available opportunity. Most of my SIPP I have already crystalized (took TFLS at first available opportunity at 55, thinking it was politically vulnerable to capping, now recycled into my ISA). I am going to be a whisker over the LTA. We sold the company last year, so retiring earlier than that would have been inopportune in timing.
The last 18 months I have been working 4 days a week, and stopped contributing to pensions, as I could see this marginal tax rate issue coming. Think I have judged my timing about right, but just feel that the system is a bit broken - it discourages work, and thus raises a suboptimum amount of tax revenue by having penalising marginal rates.

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Re: Declaring Victory and moving on

#425423

Postby Wuffle » July 7th, 2021, 7:58 am

Not sure about sub optimal tax raising.
Be aware that if you bugger of from near the top of the tree, EVERYONE down the food chain gets a promotion and a pay rise! Yay!

Off you go.

W.

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Re: Declaring Victory and moving on

#425426

Postby Lootman » July 7th, 2021, 8:03 am

TUK020 wrote:The last 18 months I have been working 4 days a week, and stopped contributing to pensions, as I could see this marginal tax rate issue coming. Think I have judged my timing about right, but just feel that the system is a bit broken - it discourages work, and thus raises a suboptimum amount of tax revenue by having penalising marginal rates.

The Laffer Effect at work, up close and personal.

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Re: Declaring Victory and moving on

#425435

Postby JohnB » July 7th, 2021, 8:44 am

Its clearly a problem for society if people at the top of their game decide not to play any more, whether they be business leaders or doctors, or even actors. But if we reward excellence with more money than people need, and add grit to the process, whether that be taxation, regulation or bureaucracy, of course they will move on.

But most jobs aren't like that, there are suitable candidates to replace any retiree, and if you attempt to flatten the reward curve in one area so experts need to work longer for financial reasons, the talent will choose different career paths.

Lootman
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Re: Declaring Victory and moving on

#425437

Postby Lootman » July 7th, 2021, 8:53 am

JohnB wrote:But if we reward excellence with more money than people need . . .

I like the way you just casually slipped that highly controversial phrase in there, as if no reasonable person would disagree. :D

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Re: Declaring Victory and moving on

#425446

Postby xxd09 » July 7th, 2021, 9:46 am

Very interesting debate with both sides in the right
Government needs more cash -Covid and National debt
Money is an incentive for a lot of people to work,work harder and work longer
It’s always problematic when “vocational “ work like medicine gets involved with cash incentives-risks misdirecting the vocation
We also need successful buisnesses to pay the large amounts of tax to fund our country
Too much tax leeway and the brightest and best game the system and leave us all behind
Too tough a tax regime and the government kills the goose that lays the golden egg!
Who would be a politician
Some sort of compromise is the answer
xxd09

hiriskpaul
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Re: Declaring Victory and moving on

#425816

Postby hiriskpaul » July 8th, 2021, 11:34 am

TUK020 wrote:Need to update my will so this gets left to my kids.


I have read that you should absolutely not do that as there is a risk that the HMRC will consider your SIPP as part of your estate and so subject to inheritance tax. As has been said, use an expression of wishes form/letter to the SIPP provider.

TUK020
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Re: Declaring Victory and moving on

#425958

Postby TUK020 » July 8th, 2021, 7:05 pm

hiriskpaul wrote:
TUK020 wrote:Need to update my will so this gets left to my kids.


I have read that you should absolutely not do that as there is a risk that the HMRC will consider your SIPP as part of your estate and so subject to inheritance tax. As has been said, use an expression of wishes form/letter to the SIPP provider.

good point,
sloppy/loose terminology,
need to update my affairs: will, expressions of wishes and all the rest

TUK020
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Re: Declaring Victory and moving on

#436477

Postby TUK020 » August 21st, 2021, 3:06 pm

Update:
Have reviewed wills/expressions of interest/trust funds etc.
Can leave everything as is at the moment.
Should be able to simplify in a couple of years when the youngest reaches 25 (most of the complexity is about what to do if both my wife and I were to die together, and how to cope with juniors in this event).
Drawing first money from my SIPP at the end of the month

Been down the gym this morning, so everything hurts a bit.
Seeing friends, enjoying myself. Visited Cowdray Park in Midhurst this week, very pleasant.
Will be starting tennis next month.
Have been doing quite a lot of gardening.
Just been packing the car for 2nd daughter to move out.
Life moves on. Not particularly missing work - missing the friends there, but staying in contact

scrumpyjack
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Re: Declaring Victory and moving on

#436515

Postby scrumpyjack » August 21st, 2021, 5:43 pm

Lootman wrote:
JohnB wrote:But if we reward excellence with more money than people need . . .

I like the way you just casually slipped that highly controversial phrase in there, as if no reasonable person would disagree. :D


Yes here in the People's Republic of the UK, WE (ie the state) decide how much each individual should be 'rewarded'. There is no such thing as the free market, competition etc. The State must control and organise everything, (as in Venezuela) and control all aspects of people's lives. :D

hiriskpaul
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Re: Declaring Victory and moving on

#436780

Postby hiriskpaul » August 23rd, 2021, 8:15 am

TUK020 wrote:Update:
Have reviewed wills/expressions of interest/trust funds etc.
Can leave everything as is at the moment.
Should be able to simplify in a couple of years when the youngest reaches 25 (most of the complexity is about what to do if both my wife and I were to die together, and how to cope with juniors in this event).
Drawing first money from my SIPP at the end of the month

Been down the gym this morning, so everything hurts a bit.
Seeing friends, enjoying myself. Visited Cowdray Park in Midhurst this week, very pleasant.
Will be starting tennis next month.
Have been doing quite a lot of gardening.
Just been packing the car for 2nd daughter to move out.
Life moves on. Not particularly missing work - missing the friends there, but staying in contact

Offspring moving out is not necessarily a one way trip. Mine have gone and come back multiple times. Youngest, at 27, moving back in again in November with boyfriend while they consider buying.

TUK020
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Re: Declaring Victory and moving on

#436819

Postby TUK020 » August 23rd, 2021, 11:18 am

hiriskpaul wrote:Offspring moving out is not necessarily a one way trip. Mine have gone and come back multiple times. Youngest, at 27, moving back in again in November with boyfriend while they consider buying.

Don't I know it :D
Still, we had 5 youngsters in the house over lockdown (my 3 + s-i-l + foster daughter). Now down to 2 (well possibly back up to 3 as my son seems to be moving his girlfriend in). So just getting the numbers down seems progress

TUK020
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Re: Declaring Victory and moving on

#491432

Postby TUK020 » April 4th, 2022, 8:55 am

TUK020 wrote:
hiriskpaul wrote:Offspring moving out is not necessarily a one way trip. Mine have gone and come back multiple times. Youngest, at 27, moving back in again in November with boyfriend while they consider buying.

Don't I know it :D
Still, we had 5 youngsters in the house over lockdown (my 3 + s-i-l + foster daughter). Now down to 2 (well possibly back up to 3 as my son seems to be moving his girlfriend in). So just getting the numbers down seems progress

Numbers going up again!
Will have a Ukrainian mother & young daughter moving in when the Home Office pulls its' finger out and finally grants some visas


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