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

[@nguyenTYN-g9j]

Am retiring soon but the thought of retirement gives me weakness. My apologies to everyone who have retired and filing social security during this time after putting in all those years of work just to lose everything to a problem you never imagined to happen. It’s so difficult for people who are retired and have no savings or loved ones to fall back on.

[@Morgangreen-b1l]

True, It has never been easier to understand how to build your money after retirement than it is right now with the inflation, when you may study and experience a completely variegated market passively by employing a successful portfolio-advisor. The impacts of the U.S. dollar's gain or fall on investments, in my opinion, are complex.

[@Michelle-g8e7i]

Agreed, investing with the help of an advisor set me up for life. Retired with reasonable $$ portfolio in stock only. I worked hard everyday as a teacher for 32 years, and my salary was over 100k annually. Supplementing my income with stocks and alternative investments helped me by far beat the retirement

[@unclepann-g9x]

I've worked in real estate for over 25 years and have neglected a major stock portfolio. This served me well when I was flipping and renting houses, however I need a different plan now.. mind if I look up the professional guiding you please?

[@Michelle-g8e7i]

Sure you can! Sonya Lee Mitchell is the financial advisor I work with. Just search the name. You’ll find necessary details to work with to set up an appointment.

[@unclepann-g9x]

Thank you for saving me hours of back and forth investigation into the markets. found her web instantly. After reviewing her credentials and conducting due diligence, i reached out to her.

[@AdamLevcross]

This is a very informative video, although I'm still confused. I'm worried about retirement planning and I want to ensure a comfortable future. I've worked hard my entire life and I want to enjoy the fruits of my labor without financial stress. I'm really concerned about whether I've saved enough and invested

[@KwegansHub]

That's completely understandable . Ensuring financial security in retirement is crucial. Have you considered consulting a financial advisor?

[@ThomasColt]

That's true. Assess to reliable information and professional guidance is key to success in investing. That's where a CFP comes in. You should definitely consider working with one

[@AdamLevcross]

I have been advised on that for a while, but finding one who understands what I want and can work with me to that accord is whom I'm in search of. Any recommendation please?

[@KwegansHub]

Yes I do, I recommend JOSEPH NICK CAHILL to you. He is a renowned figure in his field. I recommend him to you because I've been where you are and understand your need for an open ear

[@AdamLevcross]

Thanks for this, I just searched his full name online and I saw his website. I got his email address from his website and have sent him a mail. I hope he replies me on time

[@richardhudson1243]

People who are able to retire early are lucky . I have 15 months till 65 and need to look at calling it quits, my only fear is running out of funds much later, thus keen on investing. What could be the safest possible ways to invest for cashflow, in order to afford lifestyle after retirement?

[@winifred-k9e]

consider investment planning, learning from a well experienced advisor is invaluable and a great thing to do now

[@IamJonny-o4v]

That's right. I am a wife, mother of four and new grandmother, 28 years in Corporate America, retired recently at 57 after discovering the freedom investing could provide, been contributing to my portfolio since the pandemic in early 2020, and have grown a $250,000 savings account to almost 1 million, credits to my investment advisor.

[@LUCIASMITH-d1z]

Impressive can you share more info?

[@IamJonny-o4v]

Certainly, there are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Melissa Terri Swayne” for about 4 years now, and her performance has been consistently impressive.

[@jackson-z7o]

Thank you! I entered her full name into my browser, and her website came out on top. I filled her form and i hope she gets back to me soon.

[@paultaylor7082]

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.

[@northstaffscountrywalks]

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.

[@davidtucker6092]

Thanks

[@christinechandler4261]

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

[@RonMcmurry]

With you.

[@acapocci]

Agreed. How about a married couple a few years apart neither with defined benefits. There is a point where one is still working the other not. The step by step guide to minimise tax and maximise pension.

[@sultanoftippoo3857]

The guy who made this video I suspect is only interested in clients with big pension pots. An IFA who takes 1% on a pot of £800,000 makes £8,000 a year in fees but only makes £800 a year from someone with a pension pot of £80,000. No surprise he doesn’t want his clients reducing the pot size (whatever it is) by 25% as it earns him less money.

[@paultaylor7082]

@@sultanoftippoo3857 I make the same point elsewhere. The key is to keep your yearly income below the £50K limit per person, that way you avoid being clobbered for Income Tax at the higher rate. Also taking out your 25% tax free as a lump sum means that you're not as exposed to inflation, where over the last decade or so, pension pots have failed to keep pace with inflation. This is no longer the case with many savings accounts, due to increased interest rates, they're offering 5% or more interest.

[@paultaylor7082]

I wonder what percentage of people watching this video have private pension pots of £800K plus? I know I don't, along with probably 90% plus of the population. This video really didn't teach me anything I didn't know, having been both self employed and PAYE at different times, running a small business (recently sold as I retired). I've had an accountant making sure I don't pay more tax than I need to, as well as a pension adviser. As you say, this video is aimed at those with large pension pots and 40% taxpayers, not the vast majority of people. The Government Pension Advice service is good, I used it before I got my State Pension in 2018. The bad news is if your pension pot is small (under say £100K) and being used to supplement your State Pension, your options are somewhat limited. That's the position that many people in the UK now find themselves in and why so many people are having to work past State Retirement Age.

[@AndrewDixon2902]

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

[@markramsay6399]

This is fabulous resource. I am now 53 and to be honest have not paid attention to all this for years, but I am now (warning - time catches up with you). Paying attention now.

[@willboa5365]

I`m 55 - I would like to retire now - single , not married and no kids ..

[@mbronti]

Good on you..I wish I had been briefed on this by my advisors..it would have made a huge difference

[@antmanchester9023]

Thanks!

[@JamesShack]

Thank you so much! It means a lot!

[@ostosix]

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

[@davem.4003]

That's great if you have the time, income and flexibility to do that while you are working but it's not achievable for everyone. Although James's videos cover many topics, the general theme is around how to set yourself up to be able to retire earlier than state pension age, so that you should have a few years to enjoy your new-found freedom before old age catches up with you.

[@DiscoFang]

If minimising tax is your life concern.

[@Cat8395]

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.

[@oph1066]

100% agree I know all the bits but putting them into operation all at the same time is head-spinning, I get confused by how the tax-free allowance works, I get the allowances but the fact that it kinda of sits there and can be drawn along side the taxable party? how do you or the pension company know which part is being drawn against?

[@davem.4003]

​​I have one of these DC pensions (SIPP) and with my platform, you define an amount (e.g. £10k) to be moved into "drawdown" and 25% of that amount (£2.5k) is then transferred to you tax-free. You can also define a regular monthly income, or take ad-hoc amounts when you wish. Of course, for them to transfer cash to you, you must have previously sold some of your investments in order to hold the necessary cash in your account. It is not necessary to sell all of the investments to the value of the drawdown amount and they can continue to grow as investments. This is undoubtedly a more complex scenario, so if you are not comfortable managing this yourself, then that's where a financial advisor can help. The alternative is that you effectively turn your DC pension into a DB pension by taking a lump sum and purchase an annuity. Of course, you may prefer to mix and match solutions, so you could purchase a short-term annuity that provides income until state pension age, at which point you could use drawdown to top-up the state pension, or purchase a longer-term lifelong) but lower value (income level) annuity in order to maintain a consistent level of income. There are so many options that it can be difficult to make a decision about what is best for you. Financial advisors can be a great help but they can be expensive. Start by watching more of James's videos and also talk to Pension Wise from moneyhelper: "Pension Wise is a service from MoneyHelper, backed by government. We offer free, impartial guidance to over 50s. We’ll explain the options to take money from your defined contribution pension pots."

[@Neklank]

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 :)

[@neilthewheelio]

Don't worry, I struggled with it too. Numbers are not my strong point.

[@darrylglynn1557]

Me too. This is a subject that really needs to be in the school curriculum.

[@danpalmer7676]

None of us have a clue.I am planning on getting help from a planner as it's too important to screw it up.

[@Spudd66]

The whole industry needs a change it's deliberately complicated so you're likely to make mistakes and not draw what you could or draw too much or drive you into the arms of financial advisers taking thousands of pounds from tiny pensions of the average worker just to tell you even more gobbledygook 🤷

[@Spudd66]

Kind of says it in the title do I need 20k 40k or 60k haha where are the videos for 5k a year plus state pension???

[@steveaga4683]

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!

[@willboa5365]

you need to speak to an independant financial advisor ... to give you impartial advice .

[@steveaga4683]

@@willboa5365 Not sure that this is a solution! Financial advisors are just salesmen.

[@kitrssurfer9185]

You could be on life styling investment moving to bonds. It's big scandal larger than ppp. Google it. Stay invested higher risk stocks, request to not go into lifestyle

[@wakeywarrior]

Sound like you are in poor funds, very low risk investments with no growth.

[@civagnanamperivasamy726]

Pension fund milking our pot

[@JamesShack]

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

[@tancreddehauteville764]

Maybe, but for a lot of people it makes sense. If the future is being aged 75+ then it's better to have cash while you are young enough and fit enough to enjoy it.

[@0scartheCat]

the government will probably take this away in the future ( i was told this by a professional tax planner )plus inflation will eat it all in the future.. I took a tax free lump sum and bought Bitcoin, so far so good, I could have bought property but too risky

[@Goady1000]

​@@0scartheCathow is property more risky than bitcoin? At least the property is real

[@nuntiusuk3345]

But what about taking a TFLS from a DB scheme which has index linkage increases ? That’s a whole different calculation ?

[@0scartheCat]

@Lookup2Wakeup DYOR Bitcoin is verified.. lookup the Bitcoin Rainbow chart where as property is at the top

[@pablob618]

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!

[@M896]

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

[@neilarmstrong6249]

Really excellent video!!...if only more people were aware of these pitfalls...it also demonstrates how incredibly difficult it is for the average person to manage their pension in a tax effective way by themselves.

[@clivedyer17]

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

[@JamesShack]

I’m glad you find it clear!

[@gonnahavemesomefun]

Totally agree, exceptionally illustrated and described. A double-whammy of mind blowness in that video! My wife and I are Neil and Grace in the waiting. I can't help but think sitting down with James even now would at least allow us to flex and adjust what we are doing each year as we/tax bands/inflation flexes. Because at the moment I plough the whole £60k into my pension because I pay 40% and my wife pays the basic tax rate. We are also on course to pay our mortgage off ten years early so will have a lot more disposable income to save 'somewhere'. Absolutely fantastic video, I had thought I'd learned all there was to learn about pension drawdown but 🤯

[@stevenjackson9312]

Just had this video recommended by the algorithm. I would like to think I'm pretty financially literate (paid off my mortgage early and made large pension contributions when times were good), but I definitely learned some new and useful stuff from you. Subscribed immediately, and I look forward to exploring your past videos as well 👍

[@johnennis3542]

Hours of useful viewing ahead for you!

[@brencostigan]

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.

[@thomaschilds8781]

This is what confused me too. Would there still be a net advantage, even with this hit?

[@davem.4003]

James discusses several complex scenarios. Taking one relatively simple example, Neil should pay enough into his pension to bring him into the 20% tax bracket. Then, Grace contributes to her pension, gaining the same relief that Neil would have received (20% + employee's NI). The difference comes when they take an income from their pensions in the early years (prior to state pension age) because Grace is not making full use of her tax-free personal allowance, so where Grace takes income, she can receive a total of £12,570 tax free, including her government pension but Neil would be paying 40% tax to achieve the same net income because he's already using his full personal allowance plus the 20% rate allowance. Edit: At the risk of making this look more complex: "Grace's pension may have 20% relief input but that money was freed up by paying 40% on Neil's income". Yes, so the net result is that overall, the couples pension contributions were subject to tax at just 20% (going in to Grace's pension) but they are now able to make full use of Grace's tax-free personal allowance and 20% tax band, on the way out. This would still benefit the couple if Neil was hitting contribution limits and unable to get down to the 20% tax bracket. This is not a problem that most of us, contributing within the 20% tax band, need to worry about but maximising the future use of a partner's personal allowance would still be a big benefit, for a couple, especially if retiring prior to normal state pension age.

[@rajdoshi-s5v]

Excellent presentation though one has to work through taking time to go through their own tax and pension computation. Thank you.

[@wgj4813]

This is a good video and it makes you think how you should plan your pension contributions and drawdown between partners to limit the amount of tax. If one partner is unlikely to cross the tax threshold to 20 % in retirement then invest in a pension for that partner and get the 20% tax free allowance. No mention is made of Isa,s you may have paid tax on the sum invested but after that its tax free.

[@tonycromby2704]

this is a brilliant video, i have never seen anyone talk about being tax efficient in retirement, well done!

[@brianmills7507]

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.

[@JohnSmith-xi3sq]

Also the tax free cash decision is a gamble on how long you will live.

[@bertiesworld]

@@JohnSmith-xi3sq Very true. I've known people to die not long after retirement. Such a waste all round. One reason I took the maximum lump sum I could. Better in my pocket than some company that might go bust.

[@thelouderyouscream]

This video gives bad advice because it assumes political stability. How do you know that the rules wont be changed in the future? Better to take available tax free cash and invest it in e.g. ISA's than risk leaving it to potential land grabs by the Chancellor.

[@JamesShack]

For most people, it only makes sense to draw tax-free cash if you want to spend the money there and then. It's generally better to keep it within the pension so it can continue to grow tax-free and remain outside of your estate. I do not expect the 25% tax-free lump sum to be removed (at least in full) because it is one of the only advantages pensions have for basic-rate taxpayers. If you remove it, the BR taxpayer gets 20% tax relief on the way in and pays 20% tax on taking it out (when in receipt of a full state pension, as you point out), so what's the benefit over an ISA? (other than IHT protection, which BR taxpayers are often not concerned about) However, there are some situations where it can make sense to take tax-free cash to fund an ISA: - You're at the tax-free cash Lifetime Allowance, meaning that any further growth gets pushed into the taxable part of your pension - You want to spread assets across tax wrappers to hedge your bets against potential future legislation changes. You need to be careful with this second option because you have to be certain that IHT will not be an issue. Which is hard to be certain of if they never raise IHT Nil rate bands again! There is also nothing to say that the government won't change ISAs or remove any of the other allowances you're trying to make use of (as they are slowly doing). But if IHT is not an issue, having a balance between tax-free cash in a pension and ISAs may make sense. As I said at the end of the video, it's hard enough to understand the rules as they are right now, let alone trying to guess what political party may get into power next and what changes they may bring. So, for the most part, it's best to play the game as the rules are now. Otherwise, you'll tie yourself in knots and never be able to make decisions.

[@chrishayes2207]

​@@JamesShack Does the same advice go for either DB or DC pensions if you are a 40% taxpayer ie it's more tax efficient to not take the cash?

[@3004andy]

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

[@stephensomersify]

Big numbers are always impressive - I'll take my flat cap off and keep hoping for handouts

[@geoffreycoan]

Good explanation, thanks. Very similar to the advice my IFA gave me on my pension planning, take the lump sum incrementally each month. I still remain amazed that in retirement I get a similar income to when I was employed but pay far less tax and of course no NI.

[@simapark]

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 .

[@iftex1-qk5go]

Love life be free... enjoy the pains of time and then relax with the gains off time???? Time is an????

[@SuzannePowell-f9f]

'the taxpayer will pick up the tab for the nursing home if your pension doesnt cover all of it .' Sounds like someone is in for a VERY rude awakening...

[@simapark]

@@SuzannePowell-f9f You obviously don't live in the UK . Over here ,if you arrive illegally on an inflatable you get free accommodation, free money, free food ,free healthcare ,free dentistry, free education and never have to work a day in your life . If you work hard all you life and save some money and pay your mortgage off over 35 years then if you need to go in a nursing home the local authority will take all your money plus your house to pay for it while the person in the next room in the nursing home who never worked and spent every penny of welfare benefits they got on wine ,women and gambling get their nursing home fees paid for by the taxpayer. This is why all the Afghan Syrian Iraqi and African economic migrants risk their lives to escape France and come to England.

[@garymelrose9727]

@@simapark - I see you live a fact free, hateful life. Tory or Reflux voter I guess...

[@jonathanknight1850]

So is it not true?​@@garymelrose9727

[@iftex1-qk5go]

Nicely explained.. Thanks. Every one has individual circumstance and they need to check that.

[@mrdanjamesuk]

James, could I please make two video requests? Employee Stock Purchase Programmes are they worth it? Pros and Cons? How does this affect other salary sacrifices (pensions) and applications for mortgages? Restricted Stock Units? Best to Hold or Sell? Short term, long term CGT etc. Happy to share some info for context and real life examples.

[@NancyHampton-cn8hh]

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.

[@Jomo-x6n]

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.

[@paultaylor7082]

Property investment has been a one way bet for the last 20 years plus, the only downside is getting a tenant who fails to regularly pay the rent. Many people in the property game buy properties at auction at reduced prices and have the ability themselves or a team ready to repair the property and depending on the rental yield, either rent it out or sell it on. As ever though, Cash is King, as you say, safer to not have to borrow money to buy the property, as changes in interest rates could cost a BTL purchaser dearly.

[@Jomo-x6n]

@@paultaylor7082 Yes it can be very stressful if you have a bad tenant. I'm fortunate to have good tenant for both of our properties. I'm a DIYer as well so yes I can do repairs etc. I make good friends with my neighbors and they can give me a bit of leverage if my tenant defaults on their rent.

[@alextaxi2593]

Yes but you can get commercial property too or you can use your own scheme to but property and pass it on to next generation

[@Bustergonad9649]

Problem with doing that is you never retire until you dispose of the property.

[@Jomo-x6n]

@@Bustergonad9649 You live off the rent my friend.

[@dominic8218]

Excellent info James - thank you 👍🏻

[@S2000Y]

This all makes sense if you know when you are going to die. Having had cancer twice i took all the cash and retired mid 50's. The world is a big place.

[@timmitchell248]

Just found your channel, and I must say your videos are excellent. Minor point on item three in this video, you neglect to factor in the benefit of compounding investment growth for tax relief for the higher rate tax payer. Appreciate this adds another level of complexity, and this is offset by potential LTA as well as the already mentioned drawdown tax implications. Your videos have given me food for thought in more detailed modelling of my own household situation.

[@AmandaJYoungs]

Wow, this is an exceptionally good video! I've recently had to make decisions about my own pension and I realise I should probably have watched some more of your videos first! (It's just one person to consider, though, and not much pension.)

[@mjaatpriory]

Great video, need to watch it a couple more times but definitely given me issues to discuss with my IFA

[@davidf8749]

I'm going to have to watch this video a few times to get all the points. Your example is of a very wealthy couple so doesn't really apply to me but you have made me look at my pension situation wrt my impending state pension.

[@AgileSnowWeasel]

It would all be helped if the taxable allowances were transferrable between people (living together) in full, rather than a mere £1000 which is a joke. Even if this only was allowed post-retirement.

[@mattwall2180]

Excellent video / thanks James

[@gregcarnall9097]

This highlights the importance of getting proper advice at retirement. Unfortunately a lot of people at retirement baulk at the thought of paying 8-10k for the advice, but as James has just demonstrated clients can save 10x that in tax efficiency. Very well explained, well done :)

[@Spudd66]

So you're saying someone with a total pension pot of say 100k is foolish not to give 10% away to a financial advisor???? Maybe address the issue of an over complicated pension system first? Not every working person has 7 figure pension pots to worry about probably because they saw too many fat cats in the 80's pissing pension funds up the wall so became reluctant to waste even more money?

[@robertday8619]

Well said!!!👍​@@Spudd66

[@tz6414]

What a great explanation. I do all my projections on excel which helps me plan. I put an inflation on mine, they don’t have that on 60k which means in 20years time it will have an effective much lower salary. I am getting 5% on my savings at the moment for the next 5 years, so at the moment my pension is fully funded by interest on my savings.

[@darrencowie1178]

Explained brilliantly and been waiting for reference to DB pensions. and how taking early may be the best approach.

[@alangordon3283]

Started receiving from my DB at 42 .

[@mtpaley1]

A excellent video. I will certainly be making changes to my retirement planning based on this.

[@MrKlawUK]

how is the 25% tax free calculated? I get the 100k/25k thing but if you draw down over time so don’t take it all at once, then the lump sum grows, how does that track the tax free part? or is it always 25% of the remaining lump sum? and is that 25% across each pension you have

[@starryvistas]

I believe in a draw down scheme whenever you draw an amount out, only 25% of that is tax free , the rest is taxable

[@annamuja1831]

Thank you for great explanation. It was very helpful video.

[@rogerexwood6608]

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.

[@graysonscott5225]

This is a really good explanation. Thought provoking and w planned in a simple way to cater to many different minds. Great presentation

[@tesla_stephen4651]

Another great video James, thanks! 🫡 Video topic suggestion: how does one go about hiring a financial advisor, how does the process work, how do the advisor fees work etc etc. Cheers 👍🏻

[@stuwhite2337]

Excellent video, thanks

[@eddied112]

Another great video, James, that highlights just how much impact a little forethought can have over the medium term. Also love that the focus on minimising tax in this video - an important aspect of sensible financial planning. Finally - EVERONE should watch the clip on compounding - yes we've all heard the penny doubling over 30 days but it's great to see happen.

[@SynStrike]

Mind. Blown. 🤯 Great video, thank you!

[@JamesShack]

My pleasure!

[@Robbo1966]

Taken the tax free cash, had a great holiday and paid off mortgage

[@stephen2203]

Excellent video. I have been taking payments by UFPLS for nearly ten years, doing that significantly reduces the payable tax.

[@fruitloop3733]

Thanks for this it's a useful insight, I take it you have a variable income approach as well?

[@stephen2203]

Yes, I have a number of income streams. At the moment my pension income has been reduced so that the fund can grow. The plan is to restore UFPLS withdrawals in the next financial year, but I am waiting to see what the clowns do before then.

[@nebakos7521]

Hi James, I'd love to see a video on NHS pensions and if there's any other way someone who is working in the NHS and privately that would maximize their future pensions or reduce their tax contribution, thanks.

[@acxezknightnite1377]

I’d like to see that video too. However the NHS pension has morphed over the years and it would depend on which pension you were signed up to. I joined the NHS in 2008 and it changed during my 9 years of employment. I have no idea what to expect when I retire!

[@tonykelpie]

Generally speaking NHS pensions are quite good, but there have been changes over the decades. Detailed information is available on each of the formats, presumably from NHS Business Agency (used to be NHS Pensions) . Best of luck

[@DiscoFang]

Fantastic video, James. And I don't even live in the UK.

[@jedijooj]

Bookmark this for when I’m 65

[@hartunion]

Another really interesting video once again.

[@markridsdale4564]

I’ve got what I would call a middle income - I turned off when I heard £5k a month - that ain’t happening

[@jamesbailey1730]

'Joint' net income of £5k

[@pedazodetorpedo]

​@@jamesbailey1730exactly. Two salaries of just over 40k each

[@boatman323]

The logic is the same for smaller amounts if you going to pay tax: The state pension will take most of your personal allowance.

[@wernesgruder1]

Life expectancy doesn’t mean it will be in good health. One or both get dementia and you can write off all that cash. You’ll end up paying up to 2k a week in health care. And it’s all coming from their pension and savings

[@youcantno3963]

Same here, have good steady middle income job with good pension but I’m not anywhere near that amount. Crazy.

[@tonydunne5131]

Great video....

[@martinjohncassidyCASSIDY]

Its quite simple really,if you have say between 10 k and 120 k , take the lot and spend it .

[@Theleemyster1]

Can you expand on this please?

[@sharonmullinger4958]

Great information James but I wish you could speak slower for some of us that don’t understand pensions.

[@BK10011]

Good information but surely each individuals circumstances are different depending on your situation. Taking a cash lump sum was definitely the best option for me. I was renting and the costs of renting are ridiculous as most will know. The average rent in my area for a modest 2/3 bed is £1300 monthly. Having taken by 25% lump sum, it allowed me to move area (closer to my family) put a 50% deposit down on a 3 bed house and be a property owner. Maybe I got lucky but got a fixed term over 5yrs (1.25%) and a mortgage costing £359 monthly, I’m saving just short of £1k per month saving around £12k per yr I would have paid in rent and NOT owned a single brick. I think it’s easy to get caught up in all the ‘whataboutery’ what ifs? etc…take a deep breath, look at what’s good for you and enjoy living in the now… many spend their entire life regretting the past and worrying themselves sick about the future…..don’t forget to live in the moment..today & tomorrow…..

[@jonbaker5990]

I agree I’m going to take 25% in a years time ahd use the money to help pay a mortgage outright . There’s no guarantee we will make old age so make life easier now.👍

[@BK10011]

@@jonbaker5990 good luck to you my friend…I hope it works out for you…I couldn’t agree more…spending 40yrs working and never doing anything for yourself is not living, it’s just existing. As someone once told me “your a long time dead”

[@timpeach4518]

Great advice as always James.

[@JamesShack]

Glad you enjoyed it

[@geolykos]

And this is why I only put minimum pension contribution and have it as a safety net rather than a main income at retirement. Stocks ISAs are a better and more liquid investment. When both earners are higher rate tax payers you're forced to redirect your money somewhere else, other than pension, since you'll definitely pass the lifetime allowance and get taxed 40-55% on any pension withdrawals. Also, who wants to retire at 70?! You're barely able to travel at that age.

[@carlkeeling]

Great video mate, thanks 👍 I'm sure I'll get it all, once I've watched it a few more times 😊

[@JamesShack]

Haha - glad you enjoyed it!

[@simonnoel649]

Hi James, great video but it does assume that a future UK government (?Labour?) doesn't remove the '25% tax free' element from a pension pot. I'm reminded of statements like "we don't give tax breaks to millionaires". I'm very tempted to take the tax free element when I can because that action removes a risk over which I have no control, namely legislative change. I can then use part of that tax free lump sum each year to supplement a sub-50k pension so paying

[@JamesShack]

Be mindful of pension recycling rules : www.unbiased.co.uk/discover/pensions-retirement/managing-a-pension/pension-recycling-what-is-it-and-what-are-the-rules#:~:text=What%20are%20the%20pension%20recycling,from%20artificially%20high%20tax%20relief.

[@davem.4003]

This works for Defined Contribution (DC) pensions but not for legacy Defined Benefit (DB) pensions, where there is only one opportunity to take a tax-free lump sum at pension commencement and there may be no option to commence taking your pension early (or to delay beyond the scheme pension age). Also with a typical DB annuity based scheme, there is no option to take a higher income at the start and then reduce once the state pension kicks in. Having separate (additional) DC pension savings provide greater flexibility in these circumstances.

[@MariaGarcia-gv8hj]

Thanks for increasing my knowledge in personal finance and investment, I recently subscribed to your channel. I want to give a big shout-out to all those working tirelessly to earn a living and build wealth during this recession. My husband and I are both retired and debt-free, and we're living smart and frugal with our money. Despite the recession, we're still earning passive income thanks to our savings and investments in the financial market. Investing lifestyle has enabled us to earn a steady monthly income through passive means, and we're grateful for it:;

[@quin5155]

Congratulations on your early retirement, Interesting indeed! Currently, I am in dire need of investment advice or tips. Earlier this year, I hesitated and failed to take any action until now. However, I am determined to try something new, as I am very receptive to various investment ideas. I want to be retired in my forties or fifties.

[@MariaGarcia-gv8hj]

No problem at all! If you're seeking to earn substantial profits from your investment, I would suggest determining your investment horizon and implementing a long-term plan. I worked with Lewis James Godfrey to create a long-term investment strategy, and he assisted us in managing our investments while we focused on my jobs without any concerns.

[@quin5155]

Thank you for your advice. It's challenging to find a reliable investment advisor here, and I appreciate your input. Seeing the success you've achieved through investing, I would love to have access to your investment advisor's information if you wouldn't mind sharing it.

[@MariaGarcia-gv8hj]

I work with *LEWIS JAMES GODFREY,* who is based in the United States. If you would like more information about him, you can conduct a search online. He even got featured on CNN recently.

[@paulmanfred9496]

Working with a skilled financial planner can be compared to having a mentor in the field of finance. I used to struggle to invest on my own and ended up losing money, but things changed once I started working with this same man, Lewis James Godfrey. He played a pivotal role in helping me improve my financial situation. Previously, I relied solely on my job and salary for income, but now I have found ways to generate additional income with ease, which has allowed me to leave traditional employment, thanks to Lewis. Nowadays, I believe that investing is not a choice, but a necessity for anyone who desires financial independence and a good quality of life.

[@nicke6394]

Very interesting 👍

[@ninesix8]

Hi. Thanks for this video, really excellent. The (potential) benefits of taking a DB pension early is not something I have seen expressed so well before.

[@JamesShack]

Thanks!

[@EGC316]

Superb summary.

[@ryansedgwick-londoncycling9007]

Super video, thank you. When you draw money from your pension, how do you define what comes from the taxable vs. non taxable pot? Is this just an election on your tax return?

[@georgenaudi9042]

Only issue here is that I can only give you 1 thumbs up. Excellent!

[@KevinM-zn4be]

Also switched off when i heard 5k a month...

[@johndoe-qg7jp]

I know what you mean 😮

[@bandolero5068]

Darn good video (again!). So useful.

[@robbiegerard7857]

My wife's (68) DC pension has not been crystalised yet, so any withdrawals (2) include 25% tax free, which we used to keep under the tax allowance threshold, this was before she was old enough to take her state pension, but from 2018 to 2021 the fund never grew then 2021 to 2022 tax year it fell 24%, so was hoping it would recover the next tax year! NO, it has fallen again, which has turned a £91K fund to a staggering £57K in just two years. This to me is negligent, do we have any rights??

[@money1182]

This also happened to my parents, and from my last pension statement it has also HAPPENED TO ME !!!

[@boo-boo511]

Investments can go up and down. Past performance is no guarantee if future performance. If you have chosen income generation over capital appreciation then this can impact growth performance as you will "drain" fund to maintain the income. We have then had all the headwinds of inflation and war sanctions, energy costs, that have contained growth and performance of assets. Increasing interest rates have also reduced valued on low yield bonds typically seen as "safer" havens than equities.

[@robbiegerard7857]

@@boo-boo511 the pension pot of £91K was never controlled by us for its risk, it was Aegon's choice, so why did they not manage it better! Or am i being to critical? In the last two years ISA's have generated guaranteed growth.

[@gnipz1]

Another fantastic video James. This is an angle I've not seen explained ever and it's certainly got me thinking

[@463Richard]

You say to leave the tax free lump sum to grow but my pension has been going backwards now for nearly 3 years. I maxed out the £40k per annum contribution since 2019 and the value has dropped by circa £100k. It continues to drop around £20k every 6 months and I now feel as I head towards my 55 birthday and as I've recently quit my job, that I should take the lump sum and pay off the mortgage, that will allow me to then just draw £12k from the rest of the pension pot PA without paying anymore tax.

[@JamesShack]

Do you know how the pension is invested?

[@463Richard]

It’s with Aegon and it’s the Scottish Equitable universal lifestyle fund. Thing is, they give stock replies to the emails I send raising concern that the unit price continues to drop despite their fund paper suggesting otherwise.

[@edwardhughes1075]

This is a really valuable video James, all your videos are great, but this one really stood out for me - thank you, keep them coming!

[@wallace-bv4rl]

I did take all my tax free at retirement. I reinvested a lot and am taking an annual income equal to the annual tax free allowance. I’m happy enough. It was the Govt freezing the LTA and my concern they might even reduce it… anyway it was got rid off. Govt need to be a bit more steady to support good long term decision making. Interesting as always, even for those that have made a few decisions already 👍

[@JamesShack]

If you’d reinvested it within say an ISA and then drawn down from that gradually that’s not so bad. However you do lose the IHT advantages of the pension.

[@wallace-bv4rl]

Yes I can recycle into ISA and my annual capital gains limit is unthreatened at the moment! My pension (lucky for me) was just above the LTA I felt my risk was bringing taxed gains and any losses I kept 100%. This is an additional reason to what I initially stated. Not sure if that’s rational when close to the LTA. Thank you 👍

[@davejohnston5158]

Advice on tax free cash from large pension pots is sensible but people won't apply to most people with smaller funds. In these uncertain times of reduced bond values believe diversification is key which includes investing in physical assets outside of the system.

[@goober-ll1wx]

You can see how middle-class James is, all his client examples are always for sooo much money! lol

[@Asif24960]

I doubt very many working class people require the need of a chartered wealth manager

[@goober-ll1wx]

@@Asif24960 just a food bank...

[@bjorn2625]

I guess people who survive on the state pension alone aren’t exactly likely to seek out a financial advisor… there’s a bit of survivor bias here.

[@goober-ll1wx]

@@bjorn2625 if you're retired with the mortgage paid off why on earth would you need £50k income? I Don't see how anyone would blast through that much money each month...

[@maria9704]

They’re his clients, not his friends

[@BlackBuck777]

Glad you pointed out sharing unused personal allowance. Works for me as I'm still employed while my wife draws a pension. I understand that once you draw from a pension you can only then make a certain amount of contributions to a new or existing plan, and only out of income as you're not allowed to recycle funds.

[@dave4583]

Leaving money in the pension to grow? My funds SHRANK last year. And inflation has taken off.

[@UmbertoDavidPanda]

If you are under the age of 30, you can probably forget the state pension part of this talk too. That's going to go away at some point in the future.

[@TheSilvercue]

The advisors on youtube never seem to think this is possible!

[@Desmond.TuTu.]

I think you three above should just pay an IFA to look after your finances ….. as I’m not too confident you actually understand long term investment strategy ….. 😮

[@TheSilvercue]

@@Desmond.TuTu. I understand it very well thanks. Most people’s investments went down in 2022, that should be mentioned. Long term the trend is upwards, av 5-8%, we all know that. But the massive top heavy nature of the worlds top companies in most global funds now and the ludicrous FED money printing and debt issues combined with many other concerning factors mean risk should always be mentioned. I still invest, because I am comfortable with my risk reward balance. I also invest in far riskier assets like crypto. The point being risk should be mentioned more and it is by the more responsible youtubers. But there is a bunch that always paint a glorious picture because it gets more likes and subscribers,

[@Ozzy1984_]

​@@UmbertoDavidPandaI hope not! Surely they can't get away with that.

[@EtonieE25]

James l love your no nonsense videos 👍

[@mattc5592]

This is a brilliant video! I have a question: if you earn between £100k-£125k is it ALWAYS the right thing to do to pay into your pension for 60% tax relief provided you are within the AA and TFLS limits?! All my calcs thus far tell me it is but I wonder if I’ve missed something?

[@JamesShack]

I'm not sure if I can say always, but there are very few opportunities better than 60% tax relief.

[@stuwhite2337]

That's the principle I've been working on.

[@wl660]

@@JamesShackC@n you elaborate?

[@NomadJRG]

Even more so if you have a student/postgrad loan and/or kids. The £100-125k area is utterly brutal in the UK.

[@jonaudis5432]

Visuals spot on 👍

[@JamesShack]

Thanks for the appreciation. They took me ages!

[@access_all_areas]

My head was fried within a few minutes. Couldn’t follow this at the rate he was speaking.

[@Fran-u3t]

You can slow the speed down press the icon up the top on the right

[@tonyh1460]

Absolutely fascinating!!! Brilliant video James

[@stevepoulton8826]

5k a month? LMFHO.

[@shrikepilgrimage5524]

Yup, not the channel for me!

[@savvyshopper1286]

Why aren’t we informed about taxes? Why are taxes so complicated? Can you do a simple video about tax? Thanks for making me think, that I may need to go read and study about tax guidances, and tax law.

[@stephfoxwell4620]

Rubbish. Always take the lump sum. Live while you have your health.

[@stephenjames674]

I question the presenter’s overall business model of charging 1% of your pension pot pa as a fee, that equates to ~10% of your entire pot in fees over your (say 20 year) retirement, or £80,000 if you are lucky enough to have a £800k pot. That is enough to pay for some pretty stupid decisions instead and renders the decision of the (presumably made up) clients mentioned in the video to employ his services as a worse mistake than their original plan. Whoops!

[@muzzer8869]

Absolutely

[@exxel01234]

100% just that the pension companies don’t want you to have your money 👍

[@amazulu3401]

Got to agree. Take the money and run, if the buggers will give you it. Have been trying to take my pension, with 25% lump sum, for 5 months. they just dont want to release that amount of cash.

[@3004andy]

I don’t know if you cover this elsewhere James? I realised one of my DC pensions was being put into less volatile holdings as I got closer to retirement. Our plans include continuing to grow our pension funds and make smaller withdrawals if there is a severe slump. I've managed to get this revised so we have a prospect of better fund growth during retirement.

[@KeithPlummer-b1u]

Hi James - great video, as always. You offer very thought-provoking insights. I have a question for you about pension contributions. I read that, as an employee, I can contribute up to 100% of my earnings or £60k per annum, whichever is the lower (putting aside carry-over for the time being). As an employee, the most straightforward way for me to make contributions is through salary-sacrifice into my workplace pension. And then I read that I cannot salary-sacrifice to such an extent that my salary falls below the National Minimum Wage. So it seems odd that, on one hand, I'm told I can contribute 100% of my salary to my pension and then, on the other hand, I need to select a % below 100% in order to avoid falling below the National Minimum Wage! Please can you clarify as the apparent contradiction seems confusing? Finally, must the National Minimum Wage threshold apply to any singular month in the year or can it be applied just at an overall level annually? What I mean by this is that, for this tax year, I have already earned well in excess of the National Minimum Wage - and so, for the rest of this tax year, am I permitted to salary-sacrifice 100% of my salary to maximise my contributions without worrying about falling below the National Minimum Wage threshold? Thanks so much for clearing this up!

[@ScotchNWry]

This is really useful. I was about to take the tax free lump sum but the tax impact down the line is an issue.

[@MrBerry67]

Invaluable content

[@andykeith1]

And this is why you need a financial planner

[@peterc.1618]

One problem with pension planning is that the government keeps moving the goalposts. Another problem is that none of us know how long we'll live. And finally, nobody can predict what the rate of inflation will be; high inflation will erode the value of taken tax-free lump sums whilst at least some pension schemes increase pensions by the rate of inflation.

[@peterc.1618]

@@alecdurbaville6355 I went to a pension seminar a few years ago and one of the exercises we did was to list our perceived outgoings during retirement. To my astonishment some of the participants felt they needed £20,000 a year for holidays. I'm not saying that pensioners should live in abject poverty but if someone bemoans the fact that they can't afford £20,000 worth of holidays a year, they'll get little sympathy from me.

[@ultanwoods]

Great video