What is the best product to draw down an income from? I am 50 and mortgage free.

28 March 2021

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Question by Sue

Hi I am a burnt out nurse who lives very cheaply wanting to reduce my hours and draw an income from my recent inheritance of 200k. What is the best product to draw down an income from? I am 50 and mortgage free. Thank you Sue


Answered by Daniel Wiltshire

Hi Sue

Thanks for your question - I can understand why you’d like to reduce your hours; I imagine it’s been a tough year for you.

The good news is that there are lots of options available.  Many people nowadays are opting to retire in phases either by switching to less stressful jobs or going part-time.  Your inheritance and low spending will help, but I suggest you speak to a financial planner to gain a better understanding of how much income you can take each year to ensure you don’t run out of money later on.

In terms of products - at 50 there’s still plenty of opportunity to make use of valuable tax reliefs.  ISAs are a great way of saving without having to worry about paying tax on potential gains further down the line.  I also suggest you consider making contributions to a personal pension arrangement, which will allow you to benefit from tax relief at your marginal rate of income tax.

For example - if you’re a basic rate income taxpayer – for every £100 you contribute, you’ll receive £125 in your pension.  Additionally, there will be no tax due on gains made whilst the pension remains invested.  And when you come to draw an income (from minimum age of 55 in your case, based on the current rules) you will receive 25% tax free, with the rest being taxed as income.

Because of the tax breaks, annual subscriptions/contributions to ISAs and pensions are limited, so – given the size of your inheritance – you would have to allocate money in stages

I hope this helps.  I’m afraid I can’t be more specific without a better understanding of your personal circumstances and objectives.  Based on the information you’ve provided; I think it would definitely worth speaking to a financial planner to help you reduce your hours and get the most out of your savings.

Answered by

Daniel Wiltshire

Independent Financial Adviser

I’ve worked in finance for 15 years, initially training and qualifying as an actuary before becoming a financial adviser. I set up my own independent practice, Wiltshire Wealth shortly after moving from London to Bradford on Avon with my young family in 2017.