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Use allowances to draw tax-efficient income

Using annual tax allowances can reduce your bill
Use allowances to draw tax-efficient income

George and his wife are ages 63 and 64, and they have two financially independent children. He retired last year and his former workplace defined-benefit (DB) pension pays out around £50,000 a year before tax. His wife receives £1,750 a year after tax from her former workplace pension. Their home is worth around £700,000 and mortgage-free. George and his wife also have half-shares in two residential properties, one of which is being sold and should give them proceeds of £220,000.  

Reader Portfolio
George and his wife 63 and 64
Description

Sipp, Isas and investment account invested in funds, pensions, residential property, cash

Objectives

£30,000 per year on top of pension income to maintain lifestyle, fund children's pensions

Portfolio type
Managing pension drawdown

“We need £30,000 a year in addition to our former workplace pensions to fund our lifestyle,” says George. “I draw £26,000 a year from my self invested personal pension (Sipp), which is worth around £1.4m and of which £743,696 is deferred. I have a pensions lifetime allowance of £1.8m and at age 75 I will face a charge.

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