The 3 Big Pension Mistakes EVERY Retiree Makes (Real world examples)

If taking tax free cash from your pension causes you to have to pay more tax in the future…it’s not tax free!

I would like to see more videos about pensions for low earners who will be getting very modest amounts of money.

I must be the rare person that still found the video complex. Pensions are an absolute minefield, well finance in general for me. Perhaps I need to play it back a few times to wrap my head round it :)

You are the second advisor I have heard saying that if you leave your cash free sum or part of it in your pension fund it grows tax free. In practice it does not. The purpose of a pension fund is to provide you with a future income with a side issue involving inheritance tax. For most people, the state pension will use up all their personal allowance so as soon as you draw from it you will pay tax so we are talking about a deferral of tax rather than exemption from it. This may not be an issue but before deciding not to withdraw any tax free cash it is important to consider other options that could be available such as unused ISA allowances, debts that could be repaid and using the increasingly small tax free dividend allowance. Others have pointed out that the tax free element is not guratanteed to be available in the future and additionally, future tax rates are not guaranteed.

This says to me, get all the good stuff done while working and change to a more sedate, low cost life style in retirement

This is very good advice if you are a robot without any human traits. Life is for living and enjoying and you only get one shot at that . Most of the population is unhealthy abd obese. There will be no enjoying life in your 80s you will be dead or in a nursing home . My independent wealth management advice is retire early . Take the full tax free lump sum and enjoy yourself with it . If you pay a bit more tax years later whats the big deal you will be too old to enjoy the extra money . If you do run out of money whats the problem ,the taxpayer will pick up the tab for the nursing home if your pension doesnt cover all of it .

You brushed over the tax that Neil would pay on his PAYE by reducing his salary sacrifice in order to direct more of the couples money into Grace’s pension. So some of the extra contributions going into Grace’s pension may have 20% relief input but that money was freed up by paying tax at 40% on Neil’s income.

This is the first time these options have been explained in a manner I can easily understand. Great video

Hi James, another great video, thanks a lot!! Your examples are great to understand the tax implications and how to maximised your income at retirement minimising the tax impact. Many of your viewers are probably considering retirement outside the UK, as I do. Although you will not be able to cover every possible country, it would be great if you could explain which tax implications we should look into if we decide to retire in a EU country, from the UK tax point of view, and which tax factors we should be looking into the country where we want to retire. Thanks!

Excellent info James - thank you 👍🏻

I love your videos - I think I’m reasonably knowledgeable (for the average person!) on personal finance but you really demonstrate in each and every video both something new and the benefit of getting a real dedicated professional involved.

Thank you James. Superbly and clearly relayed to your audience. Over the last 14 minutes, the duration of your most helpful video, I've learnt more about how pensions and tax work than I've ever learnt reading through the bumf I was provided to myself pre-retirement age. Now retired, but still well worth learning this stuff for my children, and their children too. Just subscribed to your channel fella for the sake of future proofing my family lines pensions, so again James, a big thank you to you.

I need to keep looping back to this every few weeks, makes my head spin!

It’s one thing knowing that stuff but delivering it in a logical and understandable order is very impressive

Great content and clearly presented, thank you! This has been a help in fine tuning our retirement plans.

I am 68...69 in December! I have 2 small pension funds that I have yet to draw from. They have both shrunk substantially EVERY YEAR FOR THE LAST 4 YEARS! It seems that I am paying more in administration fees than any 8nterest that they accrue! I don't need these pensions yet, but the longer I wait to withdraw, they lower the funds appear to get....on top of the effects of inflation. The system is crooked!

Bookmark this for when I’m 65

This video really really addresses those most who are high rate taxpayers. The real problem will be if the State Pension continues to rise annually (for new recipients, it's now over £10K from April 2024), while at the same time the Personal Income Tax Allowance has been frozen at £12570 between 2021 and 2027. At this rate, the gap between the two will disappear to a point where you could end up paying Income Tax on the basic State Pension by 2027. The key here is to keep your taxable income (in total, including State Pension) to below the 40% tax threshold (just over £50K a year) per person, which would suffice for most people here. The large savings shown here as regards tax savings aren't really applicable to people with pension pots worth under £200K and paying Income Tax at the 20% rate, which is around 85% plusof the population currently working who don't pay higher rate Income Tax. The key is to keep your yearly income well below the £50K mark and not attract higher rate tax.

Interesting discussion, but not the only way to look at it. The starting premise that I agree with is that it is never a good plan to draw income to the extent that you pay higher rate tax on it. My intention is however to only use regular income to pay basic bills like food, heating, petrol etc. and on that footing £30-35k pa before tax should be enough. Anything fancier, like the long haul flights mentioned in the video, get funded by carefully controlled capital drawdowns from my ISAs.

I did mine differently. I took the entire lump sum from my defined benefit pension and bought a property outright with it. I then use the rent from my property to supplement my state and private pension. I am immune to any hike on mortgage interests because I do not have a mortgage. I'm not bothered if my property does not increase its value much. In view of the chronic housing shortage in the UK, there is a good chance that my property will increase in value. It's a win win situation for me.