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  • A bit about Amanda

    Amanda is 56.

    She has around £300,000 in her pension pot. She has taken tax-free cash, but has no other income at the moment.

    Her husband Ray is 66 and has claimed his State Pension, which is currently £10,600 a year.

    They have joint savings of around £100,000.

    They have no children, no mortgage and don't owe money in any other way.

  • Background

    Amanda and Ray normally spend around £1,500 a month. They want enough pension income to cover this and enable them to spend more on holidays and other treats. They use their cash savings for big purchases and emergencies, and like to have a large cash balance for security.

    They want to use their pension savings to enjoy themselves while they’re alive. They don’t have anyone to leave a legacy to, but even if they did, their combined assets are less than £650,000 (the joint inheritance tax threshold – for a single person it’s currently £325,000) so there wouldn’t be any inheritance tax.
  • Amanda’s idea

    Amanda thinks she only needs around £600 a month to get the income they want. This means she wouldn’t have to pay income tax, as the yearly total of £7,200 is less than the standard personal income tax allowance of £12,570 (in 2023/24).

  • Our advice

    Our financial planner recommends taking a flexible income. This will enable Amanda to vary the amount of income she takes in future – for example, when her State Pension starts. Our planner also suggests Amanda should make full use of her personal income tax allowance (as if you don’t use it, you lose it) and take £1,047.50 a month. She can use any money left over each month to top up their savings for making bigger purchases, so they keep their financial ‘comfort blanket’.

    This is only around 4% of Amanda’s pension pot. Taking flexible income would mean the rest of her pot was invested and could benefit from investment growth (although this isn't guaranteed as investments can go down in value) – so an income of 4% a year would be unlikely to reduce her pension savings by much, if at all.

    Amanda agrees, so our planner researches the market and recommends a drawdown pension product with competitive charges that meets Amanda’s needs. Our planner also advises Amanda on her investment choices.

    When she’s 67 Amanda will be able to claim her State Pension, which is likely to be around £10,000 a year. Her drawdown pension will stay invested for Amanda to take flexible income from in future, in whatever way works for her.

  • Fees

    Amanda pays a one-off fee for our financial advice about her drawdown product.

    She’s also paying a regular fee for ongoing advice about investments aimed to help keep her pot growing.

    She thinks this is money well spent as she’s getting more income than she expected, free of tax.

The result

Thanks to our help, Amanda gets her £600 a month tax-free and more, with the option of topping up her savings.

This is a real-life example, but the name and details have been changed.

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