I am near to retirement and will receive a full state pension at age 66. I plan to take tax-free lump sums from my pensions. But what's the best strategy to max out my income after that?
Tax can get complicated at retirement, when many people who have never filled in a self-assessment form find they have to start doing so, and there are a number of serious and expensive pitfalls for the unwary.as a starting point. However, helping you avoid tax traps when you start drawing a pension is one area where paying for independent financial advice can really be worthwhile.
Mark Futcher: Two important levers to increase your income are to defer taking the it to a later date or to reduce the level of your tax-free lump sum Those figures are for an individual and do not include housing costs, which you need to factor in if you are renting or still paying off a mortgage. Couples will need less, and will potentially have two state pensions.
If you do not need all of this lump sum then it usually works out better for you in the longer term to reduce the level of tax-free lump sum from your defined benefit pension and take a higher income, albeit that income will be subject to income tax rules.Income from these two arrangements can be considered reliable.
The current state pension rules increase the income by 5.8 per cent each year you delay which means that if you deferred your state pension income for one year until you are 67 then the income would commence at £11,214 per annum. In this scenario you would have a £75,000 pot left over which you could keep invested in an income drawdown arrangement or buy an annuity with from age 69.and live off it in retirement: A 12-step starters' guide - and the pitfalls to avoidto maximise retirement income
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