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In this episode of Retire Well with Wealth of Advice, we’re back answering more of your most common—and most important—retirement questions. From how to make the most of your tax-free cash to what really happens if your annuity provider fails, this episode is packed with practical insight and case-based examples.
We’ve received a number of questions following recent episodes on cash flow planning, tax-efficient drawdown, and defined benefit pensions. We have outlined just some of the questions we covered in the episode below:
Scenario: “I need £41,000 per year. Can I draw £12,570 from taxable pensions and the rest tax-free to avoid paying tax until State Pension age at 67?”
Yes—with Flexi-Access Drawdown (FAD, assuming you have enough tax-free cash available it is possible. If you are not working you could take £12,570 in taxable income (up to your personal allowance) and £28,430 from your tax-free cash, avoiding income tax entirely.
However, with UFPLS, it doesn’t work quite the same way. Each payment would have 25% tax free with the remainder taxable. The maximum you could take out without incurring income tax would be £16,760 (£12,570 taxable and £4,190 tax free). To achieve £41,000 net using UFPLS, you'd actually need to draw c. £45,278 gross.
No, you can’t transfer your pension to your spouse. The only way to tax-efficiently transfer your pension to them in on death or divorce – and we wouldn’t recommend either! You could however look to maximise both your allowances. For example, if your spouse has unused personal allowance and low pension income, they could contribute more to their own pension.
If you are a Basic Rate Taxpayer, and your spouse is a non-taxpayer, you could also look at using the Marriage Allowance. The lower earner could transfer up to £1,260 of their personal allowance to the higher earner – reduce their tax bill by £252 in the process.
“Should I leave my pension income untouched because personal allowances might rise in future?”
In theory, you could benefit from higher allowances in future tax years. However personal allowances have been frozen since the March 2021 Budget and are set to remain so until at least April 2028, with no guarantee of them increasing after then.
One of the trickier parts of retirement planning is not knowing the exact timeframe. While some clients aim for a fixed retirement date, others want to phase into retirement or simply reduce hours over time.
That’s where cash flow modelling comes in. It helps us forecast different retirement scenarios—based on age, income needs, and lifestyle choices—even when there’s no single date in mind. We also discussed how care home fees can be factored into future plans. It’s about having a flexible framework that can adapt to life’s uncertainties, rather than relying on rigid milestones.
Many people who hold Defined Benefit Pensions will see their Cash Equivalent Transfer Value’s (CETV’s) fluctuate from year to year, despite their projected scheme pension remaining stable (and increasing in line with inflation). The value of your CETV is calculated by the schemes actuaries and can be impacted by a number of factors:
The more inflation-proof your pension is, the more expensive it is for the scheme to replicate in a DC environment—and the higher the CETV is likely to be.
If your annuity is from a provider authorised by the Prudential Regulation Authority (PRA), your income is 100% protected by the Financial Services Compensation Scheme (FSCS).
That gives peace of mind—especially when you’re giving up control of a lump sum in exchange for lifelong income.
If any of these questions sound familiar—or if you're unsure what’s right for your situation—we’re here to help. At Wealth of Advice, we provide tailored financial planning to help you retire with clarity and confidence.
Contact a Financial Planner at Wealth of Advice
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If you want a better view of what your future could be, we'll have a chat and work out if we make a good fit for you and your financial picture.
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