Which savings and pension pots did you use first in retirement?

[NigelDebster]

DH (56) retired at the end of march and I (56) will be retiring in October. I had been planning to retire next February but redundancy will bring this forward and the small redundancy payment will cover the difference in salary.

I've been using the Voyant software through my meaningful money subscription which has been brilliant for financial planning. It suggests using our tax free savings and premium bonds first before drawing down on our DC pensions but part of me is worried about not having an easily accessible pot of money for emergencies. I

'm interested in others' approach to which order you have used your various pots.

I'm running the cash/cash-equivalent buffer down first, but won't run it to zero. When it hits approx 1 year left I'll keep the rest as the emergency find and switch to using the DC pension, keeping the ISA to use alongside the later DB pension.

That sounds like a good plan.

I am planning to take a drawdown from pension from year 1 which is the equivalent of my tax free allowance and then top up with cash I think until I get closer to state pension/DB age.

You need easy access to a certain amount of cash, if you have taxed and untaxed savings (not your pension fund), I would suggest use the taxed savings first, and if possible transfer some of the money to ISA's. Stocks and shares iSA's perform better than cash ones in the long term, but you don't want to have to take money from S&S if the market is down, so keep some in cash. Also as you get older, you may want to change your risk profile to reduce your exposure to market volatility. Your pension funds, it all depends on how much is in them, at present I would do nothing, other than managing the funds you are invested in and maybe consolidating if you have several pension plans. At some point you will need genuine advice about annuities/ guaranteed life annuities/ drawdown/ flexi-drawdown. remember with the change in legislation the rules on leaving money left in pension funds to other beneficiaries are changing. The other consideration is do you want to give money away now, to your children perhaps, rather than waiting for them to inherit, if you live 7 years after the gift it is not liable to IHT, but if you are already in failing health maybe considered as deprivation of assets.

Currently spending a combination of cash savings and a monthly drawdown from a Stocks & Shares ISA of £2K p.m.

Retired at 54. Now 55.

Will take my £12,570 tax free allowance out of Pension 2 soon for the 2026 / 2027 tax year and same again next April 2027 to top up my cash savings and allow me to continue to drawdown. Effectively paying no UK tax for a few years while leaving SIPP’s 1 and 2 to grow.

You don't have any taxable savings income? Is it all in ISAs?

Basic rate taxpayers can earn up to £1,000 in savings interest tax free, doubt I earn more than £1000 a year in interest as bulk in S&S ISA.

Both our parents have provided us with a generous inheritance which we plan to gift on to our children for deposits, paying off student loans, weddings etc so not planning to leave pensions. We do have a mortgage free house so hopefully we won't have to use this for care fees later and can pass this on to them. So priority is to maximise our tax allowance whilst maintaining a cash buffer for emergencies.

This is probably closer to what we'll do.

I am spending the taxable cash savings first, but will stop while there is still a decent easy access pot for emergencies.

My cash ISAs are set up to mature annually, should more cash be required.

You may know this but for the benefit of anyone else.
IF you HAVEN’T taken a tax free lump sum at the beginning of pension drawdown, you can take £16,760 a year tax free.
In this situation 25% is your tax free pension amount leaving £12,570 which is your personal allowance.
This £16,760 is the amount I am taking per year for now.

I should also add, my husband is taking a lot more out of his (but he has a lot more) he retired last year and we are both 60.
We’re hanging on to our ISAs for now but have spent cash savings on house improvements.

Oh. I didn't know that. I don't plan to take a lump sum because I don't need it, expect to live forever 🤣 and prefer the increased annual income.

Can you show me the details?

I don’t know that I can, as in I am not sure where I got the info myself.
There is a pension tax calculator on the Which website where you can put in your projected drawdown amount and it will calculate your tax (most “take home” calculators obviously add in NI etc) The sweet spot is £16,760.
Caveat, the 25% allowance if you don’t take it at the beginning in a lump sum but annually does still count towards your total allowance of £268,000 (ish) but that shouldn’t be a problem for most!!!
I have done this three years running though.
The first time they (Hargreaves’s Lansdown in my case) paid me 12,570 and I had to do a tax return for the rest back.
The last two times they have just paid the full 16,760.
I have however so far, requested the money in March, so towards the end of the tax year.

Provided you have no other taxable income.

Your pension has a tax free portion (25%) and a taxable portion (the rest of it). You have a choice about whether you take the whole tax-free 25% in 1 lump or in smaller chunks.

You can't, however, chose to only tale the taxable bit. Until you've used up the tax-free bit, 25% of each withdrawal comes from the tax-free section.

I retired at 56. Lived on my savings/ISA's for 2 years. Drew down tax free lump sum from my SIPP and bought an annuity to last 10 years knowing I would be claiming a full old aged state pension then. Started another SIPP immediately investing £10k a year which government pays 25 percent. Started taking Teachers Pension at 60. Spent tax free lump sum first. Continued reinvesting my pension into my SIPP. You can reinvest £10k a year and government is paying 25 percent of that a year. I'm 64 now and shortly I will take tax free lump sum from current SIPP which has excellent growth of 20-22 percent each year as I invested in tech and simultaneously buy another annuity for 10 years and start another SIPP paying in £10k a year. I put in the £10k a year as that is maximum I can as I'm claiming my Teachers Pension and if I don't put it into the SIPP I would go into higher tax payments. By paying into SIPP I just stay under threshold.

Not quite there yet, but my plan is to keep my cash as a hedge against stock market falls, so will draw down.

If you will be a higher rate tax payer at any point once you are retired, I would consider drawing down up to your 20% threshold and move it into a stocks and shares isa.

Great point and yes I did know this. However I prefer to take the lower amount and preserve the right to take my £268,275 TFC as a lump sum at some point

A friend will reach SPA next year, they had already retired early & release funds to live off if they continued in the same way it would take them into the next tax banding (£50k) so instead they will take more this year (just below £50k) & reduce the amount in subsequent years to make sure they stay within the basic banding even though they don't need that amount - just another angle to think about.
Now I need to do more research as to how you can invest money in a SIPP that isn't from income, as my understanding is that I can't invest rental income

I have just been 60 and DH is almost 58. I have been retired 5 years and DH for 18 months. He got a lump sum as took voluntary redundancy which we bought a motor home with. We have just lived on our defined benefits pensions and haven’t touched anything yet.

I'm not sure this is right.

With no income, or pension income only, the most you can pay into a pension is is £3,600, gross (so, including the govt tax relief, at 20%).

The £10,000 limit is not for non earners. It's for earners who have started to take their money purchase pension but are still working, so the amount they can pay in is capped. This doesn't apply to you.

This rule is place to prevent exactly what you say you are doing - pension recycling.

You'll probably find your SIPP has only been applying the tax relief to the £2,880.

I have earnings from rental property but I'm still retired.

You can if you pay tax on the rental income. It's an earning from self employment.

I don't think that counts as relevant income for the tax relief either.

In your shoes, I'd speak to HMRC.

It's important that other readers don't think they can do what you say you are doing because, on the facts presented, it's wrong.