Where Should You Pull Funds from First in Retirement?

[@JamesShack]

On 30th October, Rachel Reeves is expected to introduce significant tax changes that will affect investors. If you want my synopsis on the day, sign up for my Newsletter here: james-shack.co.uk/newsletter

[@paulmussett94]

Subscribed to the newsletter! Thanks!

[@jamesosborne1228]

Subscribed, thanks.

[@bigbangerz5856]

I'd like to know how I get a refund on my national insurance contributions if the future pension rules change

[@guyr7351]

@@bigbangerz5856sadly the NI contributions are missold as your contributions to your pension. In reality it is just a tax to fund current state pensions. The con that you have to pay 35 years of full contributions to receive your state pension benefit adds to this. Anyone earning the average wage would if their NI deductions were put into a pension plan save enough to get a pension equal to the full state pension invested and saved for 35 years. If you then add the monies saved into your auto enrollment scheme over the same period the. Most would be OK. Those people earning £10K or more a year above the average wage (£35K ) are being short changed by the system

[@mrscreamer379]

Many banks will let you borrow up to 50% of your SIPP portfolio for commercial assets. So you might have 400,000 in a pension, but you could then borrow 200,000 against that, buy small commercial asset and then get additional rent. This has to be worth a video. No one ever talks about this.

[@stewartmclean625]

The fact that you produce these videos for free so everyone can learn and plan their future is brilliant! Thank you for all your content James! I’d say that I’m obsessed in this field yet it’s not yet my career path and I’m 33! I think I need to change that! Thank you for the inspo sir

[@keithclunk3125]

If you're watching these videos at 33yo with your 'obsession', Stewart, you'll be well sorted when the times comes to retire.

[@chrisf1600]

@@keithclunk3125 Yes, I didn't get obsessed with pensions until my fifties ! Good job :)

[@stewartmclean625]

@@keithclunk3125 thanks Keith! I’m trying to put 35ish % of net away with 2 thirds pension and 1 third stocks ISA but with one 18 month old and another on the way maybe il have to take my foot off the gas slightly for a couple years but we’re get there! I didn’t get started until 29 really just a small pension before that

[@daveannis2280]

About 2 whole days of Excel modelling led me to the conclusion I could have reached by watching your 17 minute video! Namely that, if you expect your expenditure to exceed the higher tax bracket in the future, your best strategy is to maximise the lower band as much as possible in the early years, even if that means taking it out of your pension and re-investing it into an ISA. Still - nice to have it confirmed by someone more expert than me - thank you!

[@JamesShack]

Haha, it's kind of obvious when you boil down. You don't need to project your future expenditure/income exactly right, you just need to gauge roughly whether you're likely to be pushed into the next tax band. Then be comfortable with the fact that whatever you decide on you may get it wrong!

[@ThrowBackZone]

I wish I had this advice when I started my retirement planning. It's crazy how much things have changed in just 10 years! 🤯

[@sarawilliam696]

I just switched up my Roth IRA to 50% SCHD, 25% SCHX, 25% SCHG, and my Roth 401k is 70% vanguard S&P 500 index, 20% vanguard growth index, and 10% vanguard international index. Seeking best possible ways to grow $350k into $1m+ before retirement, I'm 55.

[@PatrickFitzgerald-cx6io]

Those sound like great picks! consider financial advisory so you don’t keep switching it up, top 3 payers for the month were $OHI, $KMI, and $EDP... not bad for 350k

[@Justinmeyer1000]

You have a very valid point, I started investing on my own and for a long time, the market was really ripping me off. I decided to hire a CFA, even though I was skeptical at first, and I beat the market by more than 14.3%. I thought it was a fluke until it happened two years in a row, and so I’ve been sticking to investing via an advisor.

[@NoorJari406]

I'm intrigued by this. I've searched for financial advisers online but it's kind of hard to get in touch with one. Okay if I ask you for a recommendation?

[@Justinmeyer1000]

‘’Aileen Gertrude Tippy’’ is her name. She is regarded as a genius in her area and works for Empower Financial Services. She’s quite known in her field, look-her up.

[@NoorJari406]

Thanks a lot for this suggestion. I needed this myself, I looked her up, and I have sent her an email. I hope she gets back to me soon.

[@paulwright9749]

Would be good to have a video on how to choose a good financial advisor and what you should consider in doing so?

[@davidellis8141]

My experience with advisers is that they’re there to make money from you. They do not work in your interests.

[@wgj4813]

I am a DIY pensioner guy and just invest in funds cause each fund has a clever manager to pick the best stocks for the fund. Not all.managers are the same but a pretty decent guide is 5 year performance. Find a list of the top performing funds - investment platforms have them and buy those top funds . They will rise , they will fall but over five years they have up to now always grown.

[@danpalmer7676]

@@davidellis8141 I agree.They seem to always want 3% of your investments. I will only use someone with a flat fee that i am happy to pay. That 3% can end up being quite a chunk of your money. I was going to have to pay £5,700 for pension advice that i will now decide for myself.

[@DougVandegrift]

Man the example dude has rental income? He's already way better off than most his age.

[@Rannerz]

Watching James Shack whilst I'm on my road to being a CFP >>>

[@JamesShack]

It’s a great profession!

[@Rannerz]

@@JamesShack Your content was a primary reason to finally do it, thanks for the great videos as always!

[@JamesShack]

@@Rannerz That's great to hear!

[@amarkdixon]

Interesting to see how this changes after yesterdays budget re: inheritance tax

[@nigelallen1500]

Another great video. I have friends who ask me about pensions, and I always give them your name to watch some videos to help educate and make informed decisions. Big decisions like this needs better than ‘bloke down the pub’ advice. Keep up the good work, and let’s see what tax hurdles we have to negotiate next month.

[@JamesShack]

I'll keep it up as long as I can!

[@guyr7351]

Hi James good video as ever. I retired last November at 63 just short of 64. I have a DB scheme due Feb 25 with a tax free portion. Two DC scheme pots, one crystallised ( smaller pot) the other partiallly crystallised. A small rental Property bringing in £5600 a year. My mortgage has at present until 2034 to run but we’re overpaying currently via wife’s wages. I am basically using the rental income and funds from the crystallised pot as my salary. Utilising my tax free allowance to access the DC pot. In Feb 25 when works DB scheme pays out ( hopefully with the 25% tax free) I can drop what I’m taking out of the crystallised DB pot. Then Feb 26 I will receive a full state pension, once getting that I should be able to have a combined income above what my net last salary was so fingers crossed all is good. When the crystallised pot is used up I’ll then be able to do flex draw down on second DC pot. When I take my DB scheme and the 25% tax free ill invest some into an ISA as well as add £2880 to the second DC pot my tax free sum should allow me to have that modest amount saved as easy access

[@JamesShack]

It sounds like you've really thought about this, which is great to see. (To be clear, I am not suggesting this is the correct approach, as I don't know your full situation)

[@guyr7351]

@@JamesShack hi James I have thought about it, for a few years I was putting bonus payments into my pension. Inheritance allowed me to boost that and reduce mortgage debt plus but the small to rent. Had my plans checked by a pension specialist, pension wise and also my son qualified as a financial advisor 18-24 months ago and he checked numbers and my plans. So it’s go steady spending wise for 18 months as once state pension starts I’ll be OK as it combines with other income streams. I won’t be the richest or the poorest but I’ll have enough plus some reserve

[@dennisfraser6896]

Any thing over your state pension you will be taxed on.

[@guyr7351]

@@dennisfraser6896 yes I know, once I have more than £12500 it’s all classed as taxable income but I can take flexible draw down should I wish from one of the DC pots with 25% being tax free. So I could take £1,000 pay tax on £750, which would give a net tax rate of 15% on the £1,000

[@stevemorrison4183]

Great Video. Presenting a complex strategy with clarity and well illustrated choices. I love what James does on KZbin and will really look forward to his dissection of what Rachel Reeves does in the budget. One thing is for sure , change is coming !

[@robertmarsh3588]

Excellent video. I'm about to finish work and need to look at exactly this sort of calculation. The instability of markets, and potentially now taxes, are nasty complexities. It is a huge shame that defined benefit pensions are so rare in the private sector. It is also very disappointing that there isn't longer term consistency on matters like pension policy across governments of different political leanings.

[@jocar-1735]

DB pensions are great if you want to work until scheme payment retirement age and then live a for long time since they provide guaranteed income. However, with a DB pension in payment on death the DB pension is typically halved to spouse or if no spouse then the pension ends. After working for many years in a large company with a DB scheme it became apparent that many people did not get to enjoy their DB pension for a long time (many died before age 75). Given the above, I retired early taking advantage of a DC pension taking this 7 years before my DB pension commences. Whilst I hope to live for many more years at least I know that if I don't that my beneficiaries will receive my DC pension.

[@Dickie101]

Thanks James - A really useful decision making template and explanation of the key elements to think about. 👍

[@mkckfrancis2]

Your explanation and clarity is superb. Thank you

[@JamesShack]

You are welcome!

[@iancford]

Well explained James. Deciding which pot your income is going to come from (and when) is something I will definitely need to tune a bit better. Your video has made that even clearer to me now. Thanks.

[@timpearson9870]

Very good James, thank you! I have planned to take early retirement (age 60) from 31st December this year. The only way I can do this is by several income streams topping up my DB pension. This has confirmed my theory into managing those buckets, so brilliant and reassuring! Dreading 30th October....

[@Richard-kf7ul]

Great video James. I plan to retire in 2yrs at 62. I’ve a medium SIPP pot and State Pension at 67. I’m reluctant to use a part Bonds allocation to diversify from a global tracker, primarily after bonds crashed in 2023 and have a slow recovery. I do however want to protect against sequence of returns risk. Could you do a video on other suggested approaches to balance risk. Many thanks

[@Chiefinho]

A bond ladder might be something you want to look into. There’s a video on PensionCraft that explains them

[@jocar-1735]

Have a suitable % of pension/ISA as cash, around 3yrs worth of essential expenditure. Read Guyton-Klinger sustainable drawdown methodology, guardrails and portfolio management rules.

[@chrisatkinson1250]

The problem is we have governments and civil servants that have gold plated defined benefit pensions, and none of the pension changes they introduce in the budget will affect them. They continue to live in a world the working man/woman lost many years ago, and labor are no better that the previous government.

[@jimbojimbo6873]

They are also working man/woman

[@Guy0n]

@@jimbojimbo6873. But the point is, working or not they make decisions safe in the knowledge it will not affect them.

[@jocar-1735]

You can't leave a "gold plated" defined benefit pension to dependants with tax advantages which is what you can do (currently) with a defined contribution pension pot. If the 25% tax free lump sum is to change (hopefully not) in the budget won't this impact DB pensions as well as DC pensions ?

[@davem.4003]

​@@jocar-1735One of the issues would be that there's no "pot" to take 25% of in a DB pension. The tax-free lump sum criteria will be defined in the scheme rules, as is the eligibility age (the scheme "Normal Pension Age" (NPA)), so that creates even greater complexity if they want to change the taxation rules

[@davem.4003]

"...none of the pension changes they introduce in the budget will affect them" so you must already know exactly what changes will be introduced? Please tell us, we're dying to know!

[@LopezDrake]

I just love watching and then rewatching your videos. I pick up so much helpful information.

[@helenbrooks2273]

That's so true

[@LopezDrake]

Alright.

[@Hedgebeth_H]

Great

[@brianheath1205]

Thank you James, just the kind of videos needed pre-retirement!

[@JamesShack]

I hope you find it useful!

[@TaiwoOmotosho-m9v]

​@@JamesShack Could you do scenarios like this including DB schemes ,Pls?My understanding is £5000 pounds annual salary on DB scheme is equivalent to £100000 pounds in a DC pension scheme.

[@benshephard1800]

Thank you for another fantastic video James.

[@JamesShack]

My pleasure!

[@DarrickMantilla]

one of the best videos on this topic

[@williammcintyre-v6d]

Hi James, I take it that, following the budget, for those now eligible to pay IHT thanks to the pension change, the order is changed?

[@ShaneBailey-w9i]

Very useful thoughts. No need to suffer without money in retirement!

[@tooexplore]

Great videos. All very interesting. I have no understanding of how pensions etc. work, but your videos are very easy to follow and understand.

[@kyleevanston]

Amazing video, you work for 40yrs to have $1M in your retirement, meanwhile some people are putting just $10K into trading from just few months ago and now they are multimillionaires, thanks Brooke Grace Miller

[@stephaniebeddis8069]

The very first time we tried, we invested $1000 and after a week, we received $5500. That really helped us a lot to pay up our bills.

[@jadewashington7]

I'm surprised that you just mentioned and recommended Brooke Miller, I met her at a conference in 2018 and we have been working together ever since.

[@HighlightsSerieATIM]

I'm new at this, please how can I reach her?

[@sole27ore]

I just withdrew my profits a week ago, To be honest it was an amazing feeling when the profits hits my wallet I wish I could reinvest but, too much bills

[@kyleevanston]

she's mostly on Instagrams, using the user name

[@Simon-jj2pu]

Good video, I actually took my TFLS three years ago when I retired. We planned to move to Spain, which we did last year, and I needed a Spanish tax year gap otherwise the TFLS would be treated as income on my Spanish tax return. We did the same with a house sale and moved into U.K. rented for two years so the Spanish tax man wouldn’t get his hands on any CGT liability

[@nicksimpson5366]

great video James, im hoping to retire in next 6 months and have been using exactly this type of planning model for the last 6 months. I wish there was a crystal ball for RR budget in October though. keep up the excellent work

[@aarondawkins8668]

Great video, I would like your comprehensive video on choosing the correct indexes / funds for allocation. Or a comparison between stock indexes, comparison between bond indexes or indeed managed funds

[@jocar-1735]

Excellent video content James. This is a topic that I had to wrestle with when I retired early a few years ago and as you mention is variable based on ones specific circumstances as per the table presented. The only problem is that the variables are themselves variable given the tinkering to pension rules and tax by successive governments. As somebody once said to me the best way to avoid IHT is to spend it and enjoy it while you can including gifting to others if that is what you want to do. Personally I wouldn't plan to completely draw down a SIPP or ISA over a very short time period (5yrs) as this would mean holding most of the ISA/SIPP in cash. I would set a > 10yr withdrawal timescale on each which would enable a majority 60% equities in each to provide on average a higher return albeit at the expense of paying some tax from the taxable pension pot.

[@mydiscworld]

A video on annuities would be useful. With relatively high interest rates I believe they are more viable at present

[@JamesShack]

kzbin.info/www/bejne/g16TZKaYbampfNE

[@jamesw8753]

James many thanks for this example (close to my situation) could you do a future talk on overseas holiday property both non rent earning and rent earning!

[@simonallum5328]

Outstanding video, James, thank you.

[@JamesShack]

You're welcome!

[@ClaudiaKuzounetsova]

Your channel puts out great, honest information. I really enjoy watching!

[@AuddreyKelleigh]

That's fantastic, isn't it

[@ClaudiaKuzounetsova]

Yes, it is.

[@robertasmithfe6509]

I agree with you too

[@gibboian]

This has been really useful. Im very much like this case study with DB pension coming in a few years and a SIP to drawdown until then. Im keen to avoid paying 40pc tax on any gifts to my kids in the future if/when all my tax free element is fully depleted. So I will start to draw some of the taxable and accept the 20pc (once my annual allowance is consumed). Thanks

[@jeffrylewinese8117]

I LOVED THIS! Thank you

[@chipledhungaman]

This is great, thanks James.

[@JamesShack]

You're welcome!

[@ritz1369]

Awesome Video James. Thanks for the really well illustrated example! :-)

[@GillesB-l3n]

Hi James, great video, as usual. Thanks for all the efforts you put in them ! Can we have a link pointing to a tool like one used to produce graph showned at 5:17 ?

[@Sabhail_ar_Alba]

This is really interesting and timely but there's another situation for single people when it comes to tax planning. I have a DB but no spouse so therefore a transfer out into a SIPP might be the best outcome in terms of beneficiaries.

[@chrisf1600]

This is really helpful, thanks James. I've been thinking about this question quite a lot lately. I don't have kids, and I'd like to use up my entire DC pot before I die. Even though I don't need the cash today, I've worked out that the best strategy for me is to withdraw about 40-50K each year, paying basic rate tax on this sum. I'll then reinvest what I don't spend into my GIA. This strategy seems counter-intuitive, but it's actually better for me to pay 20% tax on a series of smaller withdrawals while I'm young, compared to paying 40% on larger withdrawals when I'm older. The idea that it's better to pay tax now to save tax later was a big eye-opener for me, and it took me a while to get comfortable that I hadn't messed up the calculation !

[@JamesShack]

Is IHT not a concern for you?

[@chrisf1600]

@@JamesShack No, I'm on the left branch of your excellent flowchart @11:48. Given that I want to deplete the DC pot before I die, and given a few assumptions about growth rates etc, I worked backwards and found that it's slightly better to take the 20% hit now rather than 40% later. To be fair, the difference between the two scenarios isn't huge, but it opened my eyes to how complicated these decisions can be. Your video did an excellent job of highlighting all the relevant issues, thanks again.

[@jocar-1735]

Before state/DB pensions if you take your 25% tax free lump sum you could withdraw £67K/pa from your DC pension so £17K TFLS with £50K into income drawdown, so no higher rate tax to pay on drawdown income. Then any unused monies from above into ISA first then GIA second. When state and possibly a DB pension commence, the DC pot drawdown can be decreased to stay within lower tax bracket. If you have no dependants then plan for no monies other than guaranteed pension income from age 80, even equity release the house for more holidays ! If you have assets including property they will eventually be taken off you with care home fees. It's your pension, you have worked long and hard for it so spend it while you can !

[@chrisf1600]

@jocar-1735 exactly right, jocar. I want to start depleting the pot now, while I don't have any other income. Later, when DB + state pension kick in, I'll slow down. If I don't start early, I won't be able to drain the pot without veering into the 40% bracket. Thanks for confirming I'm not crazy :)

[@jocar-1735]

@@chrisf1600 If you are fortunate enough to have a reasonably sized DC pension pot and achieve good investment returns you will probably not deplete it even when withdrawing the maximum possible at lower income tax bracket. A nice problem to have.

[@stuartogden1660]

Thanks for the video. Did you comment on the AA effect of taking a drawdown income?

[@paulmussett94]

Great timing James. Im thinking of retiring in 4 years time at 62. I have a mix of DB DC SIPP and full SP entitlement. Im trying to navigate the best route in terms if taxation/DB rules for taking early pension and continued investment growth in SIPP etc.

[@JYT-cj4bb]

I'm also interested in this. My thinking is to take a db pension early with actuarial reduction (most increase with inflation anyway) allowing the dc pension to grow more. This seems better to me than deferring and living off dc pension. Would you agree with this James?

[@chrisf1600]

@@JYT-cj4bb I'm in the same position. I was originally planning to do the same as you, but the challenge is : how do you get the money out of your SIPP once you have DB and state pension coming in ? If you want to use up the pot before you die, chances are you'd be paying tax at 40% on your SIPP withdrawals. So my thinking is, defer the DB pension, withdraw 50K from the SIPP each year (paying 20% tax today rather than 40% future), and then recycle what I don't spend into an ISA or GIA.

[@JYT-cj4bb]

@@chrisf1600 interesting, so you would empty your SIPP and then take the db? Tbh i haven't considered the 40% tax issue as I'm a basic rate payer and will continue to be unless they freeze threshold for another 10 years or so! I'd like to keep the SIPP to pass on if i can. I definitely need to do some more modelling though (unless James can to give some clarity!) as my db reduces 5% every year you take it early, so every year i defer it it "increases" it 5%ish+inflation.

[@chrisf1600]

@@JYT-cj4bb yes, that's my plan. I think it very much hinges on whether you want to pass on the SIPP when you die. Personally, I want to drain the pot and enjoy the money :) That's why for me, it makes sense to 'front-load' the withdrawals before the DB pension kicks in, while I still have a full 50K basic tax allowance. I must say though that the difference isn't huge and I don't think the decision is worth stressing over too much.

[@stephencole9289]

Just read that one possible thing that may happen is limiting the pension tax free withdrawal to £100k rather than 25%. If you have a significant pension pot where 25% is significantly over £100k, then should you consider pulling out the 25% now. Pros and cons are complex, plus its not definite. Plus where would you put that 25% as likely to acquire significant interest which will be taxable.

[@JamesShack]

If they made that change it's likely they'll bring it in over time. Otherwise, it would ruin people retirement plans over night.

[@wallace-bv4rl]

That’s been useful and I have done this to an extent. Possible and actual tax changes have disturbed my decision making, particularly pre retirement. I have found it useful to think about allowances and always use them or have a good idea of why not. I’m spending from ISAs and premium bonds and have an taxable income of 12k a year. I do worry the 12k should be higher for the reasons you outline. Useful for sure 👍

[@JamesShack]

I'm glad it was useful!

[@pistopit7142]

Well done Sir. Lot of work went into this video for sure. Looks like rent income reduces how much he can take from his pension tax free, which then reduces total amount of tax free money in comparison if he would be drawing only from pension which curently stands at slightly above £16K per year (£12570 + 25% tax free cash) when using UFPLS.

[@JamesShack]

Glad you found it useful! Yes that it correct.

[@AgileSnowWeasel]

I wonder if selling the second home to realise £150k in money, some of which could be put into the pension (to make use of unused allowance over the previous 3 years) and the rest into ISA and near-term spending (preserving the ISA which can then be heavier on the equities) is a viable alternative. OTOH there is CGT.

[@TarottimewithVi-vw9fe]

Thank you so much for this video, very helpful 🌺

[@kaymilstead4374]

The current dilemma is whether or not the Labour government will remove the 25% relief which reduces the marginal rate of tax.

[@jonathanwarne3480]

Yes though I think most financial planners are a bit head in the sand about this and hoping to able to be reactive rather than proactive.

[@davem.4003]

@@jonathanwarne3480 How would you be proactive about something that has not been announced and is not even predicted with any level of confidence?

[@davem.4003]

@@kaymilstead4374 Consider what would happen if the tax-free lump sum was removed? a) It cannot be retrospective because that would require people to pay tax on their lump sums previously received. b) For DB pension holders, a lump sum payment may be a part of their contract of employment c) For people approaching retirement, their financial plans could be thrown into disarray d) If the decision is prospective e.g. April 2025, that would generate a massive outflow of capital from pension funds by everyone over 55 as they clamour to get their tax-free PCLS before the deadline. This would cause major liquidity issues for the funds in which pensions are invested and, as a consequence, stock markets (and bond markets, once again) could crash. Some employees over age 55 may choose to retire earlier than planned. e) Removing the tax-free PCLS would create parity with ISAs, so the SIPP would then only benefit those paying higher tax rates. Realistically, how many people earning less than the higher-rate income tax threshold (~£50k) can afford to put 40% of their earnings (£20k) into an ISA every year? This covers the vast majority of ordinary working people. No doubt there are other impacts that I have not considered. In conclusion, this would be even more destabilising than the infamous Truss/Kwarteng budget.

[@jonathanwarne3480]

@@davem.4003I suppose by looking at the alternatives and having a conversation about the potential risks - ultimately the decision is up to the client. So for instance if you had a fun of 800k and labour took away the cash free allowance that would cost you 40k at 20%. But if you crystallised that and didn’t withdraw (to protect annual allowance), you would miss out on 68k of cash free equivalent to costing you 13k. And of course there is a middle ground too. Or if they might reduce higher rate to 30% so should you put more in from somewhere else like an ISA before then, especially if over 55 so able to withdraw again. No one knows for sure but that doesn’t mean that there is nothing to look at. After all doing nothing is a decision in itself.

[@jackb5640]

​@jonathanwarne3480 as the previous commenter said, you cant discuss something theoretical that may never happen. Many would consider it scaremongering. Easy way to have your subscribers lose faith in you.

[@stephencole9289]

Another possibly complication or factor, is if Graham has adult children who need money NOW (or very soon) eg for house purchase, and if Graham wants to gift this now, and hopes to live for > 7 more years (making the gift tax free). Which pot to take if from? Might also want to do any gifting sooner rather than later to have a better chance or living a further 7 years (although if the gift isnt specifically needed now, then is best to leave in the pension). Another complication/Q: If Graham has a younger healthy wife, and they have a joint bank account, and if the big gifts are made from that joint account, who is it deemed to have come from? (eg if Graham is terminally ill with say 1 year life expectancy), can they say the gift comes from the wife? Or would they have to somehow state at gifting time it came from the wife?

[@GrahamWalker-f1r]

Maybe I missed something but with the state pension and the rent incomes hasn’t Graham already used his tax allowance?

[@JamesShack]

He has, but state pension only kicks in after 67.

[@MrChrismeenan]

thanks James, this is REALLY useful

[@JamesShack]

Glad it was helpful!

[@IbrahimIsabella-00]

Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got talking about investment and money. I started investing with $120k and in the first 2 months , my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and gets more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family..

[@BennettElizabth]

I’ve been forced to find additional sources of income as I got retrenched. I barely have time to continue trading and watch my investments since I had my second daughter. Do you think I should take a break for a while from the market and focus on other things or return whenever I have free time or is it a continuous process? Thanks..

[@IbrahimIsabella-00]

@@BennettElizabth Quitting may not be the best approach if you ask me. This is where an AI comes into the picture. I barely have time to trade myself as my job swallows up most of my time. MARGARET MOLLI ALVEY, a licensed fiduciary whom has made me over 5 figures in profit in less than seven months, handles my investments. I could leave you a lead if you need help.

[@BennettElizabth]

@@IbrahimIsabella-00 Oh please I’d love that. Thanks!

[@IbrahimIsabella-00]

@@BennettElizabth MARGARET MOLLI ALVEY

[@IbrahimIsabella-00]

Lookup with her name on the webpage.

[@annawong1305]

I'm planning my retirement already, even though I've a couple of decades left 😅 Really helpful video, thanks for this, James.

[@LordBallSac]

The financial landscape tools and rules will probably have radically changed by then might as well ignore the nonsense until the last 2 or 3 years leading up to retirement but of course save. Digital currency Ai laws super power nut jobs. Oh and the simplification of the invented system 😂

[@grumblewoof4721]

I'd love to have £40,000 per year in retirement. I am retired aged 70 and I have £30.000 income before tax and I pay £300pm tax. I could take more from my ISA and reduce my drawdown as it's flexible. This would save me some tax, so worth thinking about...thanks for the video, very helpful. I live alone, I am single and have no dependents or children and own my house but I specified in my will that every penny above my £325,000 IHT limit will go to charity, nothing to the government. Just lost my winter fuel payment of £300 :( .... I am wondering what next I will lose to Reeves ?

[@OldQueer]

It's probably good that you're not getting benefits with that level of security behind you. Especially when you're alone in old age without dependents. I hope she continues to means test benefits.

[@kw8757]

Guaranteed that the greedy socialists will rip off anyone who has saved for their own financial security and reward the wasters of society who scavenge off the backs of other peoples hard work. You have my sympathy.

[@tancreddehauteville764]

What is the £300 a month tax? Council tax? If so, sell your house and move somewhere smaller and cheaper!

[@tancreddehauteville764]

@@OldQueer Sarcasm I hope?

[@kw8757]

@@tancreddehauteville764 Probably not. This is the socialist Labour mindset. "I want what's yours, but I want it now and I'm not paying for it and I'm not working for it".

[@Lewis_Standing]

Have you ever covered how a salary sacrifice scheme eg for a company car lease would effect your pension? Would be super useful, very common to do in the NHS but less salary is less pension and employer contribution and less pension growth over time. How do i balance jam tomorrow (pension) vs tax savings now?

[@simonm9796]

Excellent content as always

[@davideyres955]

Number 1. List the expected income streams. Labour. Let’s see what we can do to f. That up then.

[@5dils]

Love your videos and recommend to so many to watch your informative videos 👌👊🏽

[@JamesShack]

I'm glad you like them, and thank you for sharing!

[@Mike-lb1hx]

I expect pensions to be treated as part of the estate. I may be being thick but why these should be while death in service benefits aren't is beyond me.

[@Elfin4]

As a 61 year old, I just am unable to understand pensions period. Wouldn't know what to do for the best, but do know unless I win the lottery I will be working until 70 at least. I just want to draw a pension at the date I want to and not have to worry whether I need to take any tax free lump sums as its all just a big headache.

[@elephantandcastle838]

Yes and there are many more out there like you. The government has a free service called Pensionwise that gives basic advice and you can get a free 1 hour call with them. Basically though you can think of pensions as a glorified savings account, with tax benefits that you could be able access now given your age. The main two types are defined benefit, and defined contribution, you should understand which you have to start with.

[@jonguy8540]

Enjoying your videos @JamesShack. Just wondering if you've covered taking both DC & DB pensions as like others no doubt I have a combination of the two. Is it a poor idea to start taking the DB early say at 55 and take the hit on monthly payments? I'm thinking perhaps not as it seems to take around 20 years for the breakeven point? Is there a best strategy for tax efficiency. Also can DB income be included in your 25% tax free element, i.e. can I take £16,760 in combination from both and pay no tax? This assumes I took no tax free lump sum from either. It's a minefield, so many questions 😅

[@JamesShack]

I covered it a little bit here: kzbin.info/www/bejne/oJq6ZZxretd_hcUsi=L6n1iSLyz2LD8mOx The tax free element is 25% of each pension. You can't take 50% of one and 0% from another. If that's what you're asking?

[@Exposure2life]

Useful video to review and cross check my plan. Knowing how future taxation will be is second guessing but increased taxation is here and I think fiscal drag will be the stealthy way. I expect this will be used more for higher rate tax payers, those with the "broadest" shoulders, as the government put it. Will basic rate threshold rise with the state pension? If not I can see many pensioners worrying how to go about paying any income tax due and in some cases simply not paying it and getting a fine etc.

[@pauldavies8658]

Love your channel. However, can you do something on working couples planning for near retirement. No channel seems to cover this subject it’s always a single persons!!!!! Paul.

[@rl3799]

DefinItely very helpful - thanks!

[@enigma1000]

Retirement has just been an exercise in tax management. And the government keep changing the rules. It’s a nightmare.

[@suedavies997]

|Thanks so much - this is s clear. Do you have a video like this - Where Should You Pull Funds from First in Retirement? - but with a GIA bucket - or GIA and Off Shore Bond?? If so what is the link? Also Do you have a link to a video about Off Shore Bonds - I need to learn about these!

[@dirtysanchez5391]

@JamesShack Any chance we can get a video on your take on how to pick individual stocks for an ISA? I know it's not the recommended approach, but US citizens like myself have unique problems when investing, one of which being we can't buy funds outside of a pension plan.

[@gumdrop808]

I think that when this governments pension review is complete in the next year or two, they will reduce or stop pension freedoms. They said they want people to have a sustainable income for life. This sounds like the definition of an annuity. I can see them bringing back the old rules of a minimum income guarantee, forcing most people to buy an annuity.

[@pataleno]

I’ll stop contributing into my private SIPP if they do.

[@JamesShack]

Let me know if you have any questions about the video!

[@Flashheartwoof]

I have a question…is that your real kitchen?

[@waynetunnah5754]

Thanks for all your great videos, I've enjoyed learning about this and how to best set myself up for retirement. One question I have is around the 25% tax free portion of a DC pension. Does this continue to grow in line with your investment growth or is it crystallised at the point you first access your pension? Thanks!

[@JamesShack]

@@Flashheartwoof It is indeed. It looks good, but it's a nightmare to film in. The light constantly changes, and the lack of soft furnishing is bad for the sound.

[@Chrissaville]

​@@waynetunnah5754 you can crystallise it in stages and take the 25% of whatever you crystallise mate. You don't have to crystallise the full lot in one go.

[@user-fv1576]

Great video. Saved.

[@jonmarx7882]

In this situation is there any advantage in continuing to pay into the pension, perhaps using funds from the ISA, to benefit from the 20% government top-up?

[@JamesShack]

Yes there can be. You can contribute up to £2,880 (£3600 with tax relief) even if you have no other income coming in.

[@oph1066]

I'm quite surprised by one part of the advice in this video, I thought it generally agreed that it is madness not to use up the Personal Allowance each year (as you can never use that allowance once it has gone) so one part you have someone taking £5K from the pension so leaving £6.??K on the table, and then taking it from the ISA tax free is a for example. But would it not be better to use the PA so still pay no tax on that income with the though that you would use the tax free is a later when you might be drawing more from the pension as A) your tax free part has run out or B) you simply need more cash that year for any of a myriad reasons

[@JamesShack]

They take 5k from the pension because they have £7k of rental income coming in that used up the rest if their PA

[@Ken_H_]

Hi James, have you done a video on the 25% tax free cash? In theory, taking it is a no brainer for tax reasons but as always I feel things are not that simple!

[@Cali369]

This one covers an example around the tax free cash kzbin.info/www/bejne/oJq6ZZxretd_hcU

[@felipegustavo8735]

Hello James Shack, thank you for the video, great content!! Some years ago I watched a video about where to park cash ("not a bank"), if I remember correctly, it was about a Vanguard UK money market fund. I can't find that specific video again... Did you delete it? Thanks for your attention in advance, best regards!

[@JamesShack]

I made it private. Our compliance team said it was not compliant because I mentioned a fund in it...

[@felipegustavo8735]

I understand... So anyone who wishes to watch it again would be able to do so only through a direct link to it? Is there a way to obtain one? Thanks for answering :-)

[@JamesShack]

@@felipegustavo8735@felipegustavo8735 Unfortunately not; I can't share it anymore. Sorry.

[@Ben-OConnor]

At 10:01 , the example shows equal amounts are taken from each pot. Does that avoid the requirement for the taxable:tax-free ratio of 75:25 by making use of a tax free lump sum when starting drawdown?

[@JamesShack]

So in that example it would be 50:50 TFC vs taxable. Which is allowed, you just can't go less that 25% TFC unless you already have taxable funds in drawdown.

[@markthomas7279]

Why would one not first exhaust your tax free allowance (circa 12,000)? At worst it can be diverted to ISA.

[@chrish9573]

@jamesshack - what are your thoughts on this? If you have no other income should you withdraw uncrystallised funds annually up to the value of your personal allowance (£16,760 of which £12,570 is taxable). And does this preclude you from moving other amounts into drawdown in the same year?

[@robertasmithfe6509]

Fantastic video.

[@nigel1654]

If i retire at 60 and draw as much as possible each year to get as much as I possible can tax free. If i have money spare put it into an ISA which can supplement my state pension later. Tax free. Because if i have money still in my SIPP it would be taxed except the 25% tax free.

[@kingzippy4975]

Hiya James, I have watched many of your videos recently, you are fantastic (like a posher, better version of Martin Lewis) I have recently put all my pensions into my work place pension with Legal and general. Currently have around £35,000 at 36 years old. Which fund they offer would you be looking at? They have a property fund, and with house prices looking thru they will increase with rates coming down. Is this a good option for the next few years? But honestly I have no idea… everything is just in a standard fund currently Also, my wife has an NHS pension. Not sure how they work or how to maximise. Have you ever done a video on this? Thanks so much. Keep up the great videos.

[@JamesShack]

I'm glad you find them useful. I have not done one on the NHS pension but here's one for you: kzbin.info/www/bejne/pqSrYX2KiJuDqassi=0YR2lci4EDD4guUn

[@conkgord]

Do an example of me 60 year old early retirement and no where near the money all use as examples please. I do have a number of decent investments btw.

[@DKNW62]

Hi James best most useful comprehensive video yet, thank you, nice to see your not jumping on the political clickbait bandwagon. A big Psychological barrier is being to careful and not spending enough I would say.

[@JamesShack]

We'll see what happens on October 30th. Probably lots of headlines after that

[@ewanbauld607]

Don't you think the state pension is going to go?

[@Rapid_GT]

Do you think theyll scrap the 20% tax relief for nest pensions ? If so would it be better to then shift that pension into another "bucket" ? Great video btw

[@adrianl5899]

One of the ideas 'put out there' is not to remove tax relief but to have a uniform level, such as 25%. This would mean basic and non-tax payers receive more tax relief on their contributions, rather than less.

[@JC-dp3xq]

Thanks for the excellent content James. I have a question. All thing being equal at present would you rather have a DB pension like the NHS pension scheme or a SIPP which is obviously DC. Many tell me the benefits of DB which are obviously great. But I think DC does have upsides too. Be interested to hear your thoughts. Thanks

[@adrianl5899]

Not James, but I would aim to have both, but not give up the DB if this was not possible. A DB pension is incredibly valuable to the member; some may have to contribute 25% of salary to DC just in the hope of receiving what the DB scheme guarantees them. I often see people saying they could opt out and make xyz% in the markets (or even crypto!) based on a pretty short period where interest rates were near zero. This seems like terrible financial planning to me. That said, plenty want flexibility and to retire prior to the DB scheme paying out, and a DC pot could be the/part of the answer in bridging the period until the DB kicks in. Further, some may want to pass on a DC pension pot. Hence, I think it's ideal if there is a DC pot too, especially in such circumstances.

[@JC-dp3xq]

@@adrianl5899 Thanks for the response. I appreciate it. This is pretty much the conclusion I came too. Stick in my DB pension but make regular monthly DD payments into my ISA allowance to give me more flexibility in the future. Thanks again.

[@Amber_107]

Wow wow. You are a genius

[@colinjamesbates]

Hi James. I have a challenge for you. Can you make a video with a positive outcome to help people on low or minimum wage with only an auto enrolment pension. There is lots of great advice, from people like yourself, that caters for people on middle or higher incomes. There's not a lot of information for people at the bottom of the financial ladder. Thanks in advance if you can help.

[@JamesShack]

Hi Colin, I did one on the "average" individual, but could perhaps look at minimum wage separately. kzbin.info/www/bejne/q3TclYKcfKh3erMsi=6MemMLc-Pm3TmZDS

[@colinjamesbates]

@@JamesShack Thanks for the reply James. Much appreciated. I work in logistics alongside people on low income with only a basic auto enrolment pension. I recently did a pensions course. Having watched your videos, the course highlighted that a lot of my co-workers might be ill prepared for retirement. I'm already seeing some people working past state pension age for financial reasons. It's hard to convince younger people to consider extra pension contributions, investing in a stocks and shares isa or developing another small income stream. I used a pension calculator to look at an estimated pension pot for minimum wage contributions to an auto enrolment pension. It didn't look like a lot by the time of retirement age and I don't think many people realise this. Sorry to ramble on. Thanks again.

[@RogerRamjet-t4q]

@@colinjamesbatesthe difficult fact is that the less you put in, the less you get out.,

[@Andy.N-_-]

Really informative as always thank you.. So i would be interested on your view of how to save tax taking your partners income into account .. lets say she (in my case) will just will get their full OAP, can you move your money around into say .. an ISA for your partner or something else? Is there a way to save tax as a couple ?

[@johndoh539]

i will be astounded if passing on a pension iht free is not removed. I have heard labour say that the tax relief on pensions is there to provide money in retirement, not to pass on wealth to future generations. In my view, its going !

[@JamesShack]

Perhaps. The death before 75 benefits are very generous.

[@jocar-1735]

I agree, a persons DC pot being passed onto anyone with tax advantage is likely to go since this benefit is not given with DB schemes and I think a DC pension should be classed as part of estate on death. The issue with very generous public sector DB schemes funded by the taxpayer compared to DC schemes contributions will probably not be tackled, this being a missed opportunity if that is the case given that average public sector pay is 8% higher than average private sector pay (ONS statistics).

[@gerry2345]

I like this vid. Good insight and interesting.

[@JamesShack]

Glad you enjoyed it!

[@AM-gw8qk]

Thanks very interesting as I have recently had the ISA/DC tax free pot dilemma. I decided to use DC as money left in ISA grows 100% tax free but DC only 25% tax free , so for same fund I should be better off. currently age 61 retired and not projecting an income needed that will push me into higher tax rate.

[@davem.4003]

Remember that, as a basic rate taxpayer, you receive a 25% rebate into your pension, as well as 25% tax-free on withdrawal. If you are a higher rate taxpayer or have a salary-sacrifice employer's scheme, then the benefits are even greater. Just taking cash (after tax) into a SIPP will deliver a 6.25% advantage over the same amount invested in an ISA in the same investments, for the same duration, for a basic rate taxpayer.

[@AM-gw8qk]

Yes good advice for max tax benefit in the accumulation stage and exactly what I did, however the topic is now about drawing down on your investments in most tax efficient way . James makes valid points if you may pay tax at higher rate later and inheritance tax but if not relevant then a fund growing tax free in an ISa should be better than same fund growing in pension as 75% taxable growth.

[@davem.4003]

@@AM-gw8qk Even in drawdown, the ISA offers no advantage unless the income would push you into the higher tax bracket, in which case the ISA has the advantage. The SIPP benefit comes from the tax rebate.

[@AM-gw8qk]

@@davem.4003 Don’t agree the ISA investment has no advantage in drawdown . Once you have stopped saving the ISA definitely has the tax advantage , all its growth is tax free but in a SIPP 75% of growth in an uncrystallised pot will be liable to tax. So if you have the choice and no other compelling reason not to I would leave in the ISA for as long as possible.

[@davem.4003]

@@AM-gw8qk If you don't agree, please do the maths and provide a worked example. The benefit of the uncrystallised pot is the 25% tax free of the 25% HMRC rebate and its associated growth. The other way of looking at this is that you already paid tax on the ISA savings, so £100 in a SIPP is just £80 in the ISA. Then, the SIPP is taxed at an effective rate of 15% (75% of 20% basic rate income tax), if we assume a basic rate taxpayer. The output is £85 from the SIPP and £80 from the ISA because we just ignored growth rates and duration if the cash is invested in the same way in each case. Try it - any value, growth rate and duration will give you the same result.

[@Brandon96712]

Thanks for sharing, I just looked her up on the web and I would say she really has an impressive background in investing. I will write her an e-mail shortly.

[@andrewstorm8240]

Big question

[@GhostWriter_Music]

so far I have a sipp I regular invest, which I won't be able to get until I am 57 so far and investment goes into index funds and a couple of top stocks I like the brands of. I also invest in other stocks which are almost instantly accessible in case I need the cash, which hover around the 5k to 6k region. the cash in bank hovers between £500 to £1000 as I like to keep a wage there to live for the month due to UC rules. I don't see any point having much more than £6k saved long term unless it is in a pension which doesn't affect when you lose a job.

[@TheThinker-ce5kq]

Sad that most people only draw their pensions for 8 years.

[@mbplove]

Interesting that you covered DB pensions, most finance KZbinrs don't seem to acknowledge their existence despite how many public sector workers we have..

[@richardthwaite3750]

Both my wife and I have around £900k in ISAs. If I die after 75 is my wife liable to IHT if there is any of my ISA money left. I have read many articles about this and some allude to the fact that she will inherit it tax free.

[@crunchstudio9475]

Believe gifts between husband and wife are free from IHT so as long as your will bequeaths it wholly to your wife.

[@davem.4003]

​@@crunchstudio9475The age at which you die is relevant to DC pensions and does not affect your wife. Whoever dies first (you, or your wife) passes remaining assets to the surviving spouse without IHT liability. Also their nil-rate allowance is passed on, unless some of that allowance had been used for other beneficiaries. In your case, whether the second spouse dies, anything remaining in the combined ISAs, plus the value of property (above the £1m, for a couple, less anything previously left to beneficiaries) nil rate band, will be subject to IHT.

[@Brrunoc1]

On the ISA part of the drawdown should I invest in eg ready made and auto allocation 50/50 stocks and bonds or a bond fund as well as a equity fund so if there is an equity crash I can perhaps drawdown the bond fund part or vice versa.

[@stevesteve7855]

My assets are being left to a party resident overseas. How does that effect inheritance tax? How is this levied and where?

[@andydonaldson]

You must pay the inheritance tax before you can access the assets.

[@mikerodent3164]

Still peddling this nonsense that "bonds are stable". After the past two years, I can't believe that someone as credible as James is still able to say this with a straight face. Not all bonds are "bonds" of course: bond funds are not bonds. But in 2024 such assertions are irresponsible. Over the past 2 1/2 years millions of people in the UK have become **poorer in absolute terms** (largely due to default contributions to lazy "life strategy" strategies practised by lazy advisers and employers). But 95% of those people don't in fact know it.

[@pistopit7142]

Bonds are stable. It's the bond funds that fluctuate. But before recent bond funds crash not many financial blogers/vlogers was saying this.

[@BoulderDash24]

My employer has an 'annuity' fund, essentially just bonds and a bit of cash, that is meant to protect against the equities rollercoaster as you are about to retire. Anyone who lumped their pension in there in 2020 probably lost a third of it!

[@chrisf1600]

@@BoulderDash24 I'm quite surprised that there hasn't been more fuss about this. In the US, i'm sure there'd be lawsuits flying around (maybe there already are ?)

[@BoulderDash24]

@@chrisf1600 Absolutely. It's supposed to be very low risk according to the fact sheet

[@jocar-1735]

Bonds have a significant interest rate related risk as seen only a few years ago. Persons with DC pension pots who were in the standard lifestyling investment option primarily designed to purchase an annuity probably saw 40% of their "safe majority bonds" DC pension pot "disappear down the plug hole" a few years ago. The world is an uncertain place and previous and future conflict has and will cause energy prices to suddenly significantly rise with the inevitable effect of increasing inflation when the cost of everything produced using energy increases. Central banks then increase interest rates to tackle inflation, the result is a negative effect on bond funds. My own pension preference is 70% equities and 30% cash and no bonds. The cash helps me sleep at night knowing the next few years drawdown monies are there and that I do not need to sell equities during a market downturn.

[@rl7111]

The total value of his assets is £1,280,000, not £1,180,000 isn't it?