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chris123 hove actually 02 Oct 19 1.08pm
Originally posted by Painter You are confusing a very simple issue. You can take 25% of your pension pot tax free. Not only 25% of what you cash in is tax free. Pension pot value £100k, you can take £25k tax free. No confusion.
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chris123

hove actually 02 Oct 19 1.08pm

Originally posted by Painter

You are confusing a very simple issue. You can take 25% of your pension pot tax free. Not only 25% of what you cash in is tax free.

Pension pot value £100k, you can take £25k tax free.

No confusion.

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cryrst The garden of England 02 Oct 19 2.19pm
Originally posted by Painter You are confusing a very simple issue. You can take 25% of your pension pot tax free. Not only 25% of what you cash in is tax free. Pension pot value £100k, you can take £25k tax free. Nope you cant just take it as a lump sum period. I've just checked. The other posters are correct. Ie 40k pot Take 10k You get 2.5k tax free 7.5k taxed at your rate say 20% So you end up with 2500 + (7500 - 20%) =7500 - 1500 So 2.5k + 6k = 8.5k You can do this every time you draw down but be careful you dont have total income including the taxable amount over 50k as any above that is taxed at 40%. Of course this may change if any political parties change the higher band to a lower amount. Let's hope not eh.
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cryrst

The garden of England 02 Oct 19 2.19pm

Originally posted by Painter

You are confusing a very simple issue. You can take 25% of your pension pot tax free. Not only 25% of what you cash in is tax free.

Pension pot value £100k, you can take £25k tax free.

Nope you cant just take it as a lump sum period.
I've just checked.
The other posters are correct.
Ie 40k pot
Take 10k
You get 2.5k tax free
7.5k taxed at your rate say 20%
So you end up with 2500 + (7500 - 20%) =7500 - 1500
So 2.5k + 6k = 8.5k
You can do this every time you draw down but be careful you dont have total income including the taxable amount over 50k as any above that is taxed at 40%.

Of course this may change if any political parties change the higher band to a lower amount.
Let's hope not eh.

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cryrst The garden of England 02 Oct 19 2.30pm
Nope I've read some more so sorry painter you were correct and the others are also correct. Two types crystalised which I think is 25% in a lump then tax all the other drawdowns. Uncrystalised which is 25% free on all draw downs then the rest taxed at your rate. HOL never fails to educate. Although with both the pension will still grow or shrink as normal. The point is though which will lose or make you more money..... I will be doing my working out nearer the time.
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cryrst

The garden of England 02 Oct 19 2.30pm

Nope I've read some more so sorry painter you were correct and the others are also correct.
Two types crystalised which I think is 25% in a lump then tax all the other drawdowns.
Uncrystalised which is 25% free on all draw downs then the rest taxed at your rate.
HOL never fails to educate.
Although with both the pension will still grow or shrink as normal.
The point is though which will lose or make you more money.....
I will be doing my working out nearer the time.

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Goal Machine The Cronx 02 Oct 19 2.32pm
Originally posted by YT Sorry, cryst, but it seems that you - and possibly other posters here - have been wrongly advised. Basically, you can't pick and choose whether a withdrawal from a pension pot is tax-free or taxable. EACH WITHDRAWAL you make, 25% of it is tax-free and 75% if it is 'taxable' - in other words it is treated as part of your taxable income in the tax year in which you draw it from the pot. If you withdraw £10k from a £100k pot, £2,500 is tax-free and £7,500 is 'taxable'. And so on. Obviously any ongoing investment growth on the remaining £90k pot means that you can make possibly bigger withdrawals over a longer period. Although investments can go down, of course. Edited by YT (02 Oct 2019 8.45am) I'm afraid this isn't quite right, YT. You are are referring to UFPLS (Uncrystallised funds pension lump sum) - whereby 25% of a payment is tax free and the remaining 75% is taxable. Under Flexi Access Drawdown (FAD), you absolutely can choose how much is from the tax free segment and how much is from the taxable section - this (the tax efficiency) is one of the key benefits of FAD. However, not all pension providers have the functionality to facilitate this. Standard Life wrap, Aviva wrap and Royal London are three providers who do have this 'tailored drawdown' functionality. For example, you could have an individual with a net income target of £20,000 per year. Under FAD, you can draw £12,500 from the taxable part to fully utilise the personal allowance (0% tax) and make up the £7,500 shortfall from the tax free cash part. Edited by Goal Machine (02 Oct 2019 5.39pm)
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Goal Machine

The Cronx 02 Oct 19 2.32pm

Originally posted by YT

Sorry, cryst, but it seems that you - and possibly other posters here - have been wrongly advised.

Basically, you can't pick and choose whether a withdrawal from a pension pot is tax-free or taxable. EACH WITHDRAWAL you make, 25% of it is tax-free and 75% if it is 'taxable' - in other words it is treated as part of your taxable income in the tax year in which you draw it from the pot.

If you withdraw £10k from a £100k pot, £2,500 is tax-free and £7,500 is 'taxable'.

And so on. Obviously any ongoing investment growth on the remaining £90k pot means that you can make possibly bigger withdrawals over a longer period. Although investments can go down, of course.

Edited by YT (02 Oct 2019 8.45am)

I'm afraid this isn't quite right, YT. You are are referring to UFPLS (Uncrystallised funds pension lump sum) - whereby 25% of a payment is tax free and the remaining 75% is taxable.

Under Flexi Access Drawdown (FAD), you absolutely can choose how much is from the tax free segment and how much is from the taxable section - this (the tax efficiency) is one of the key benefits of FAD.

However, not all pension providers have the functionality to facilitate this. Standard Life wrap, Aviva wrap and Royal London are three providers who do have this 'tailored drawdown' functionality.

For example, you could have an individual with a net income target of £20,000 per year. Under FAD, you can draw £12,500 from the taxable part to fully utilise the personal allowance (0% tax) and make up the £7,500 shortfall from the tax free cash part.

Edited by Goal Machine (02 Oct 2019 5.39pm)

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Badger11 Beckenham 02 Oct 19 2.37pm
Originally posted by Goal Machine I'm afraid this is quite right, YT. You are are referring to UFPLS (Uncrystallised funds pension lump sum) - whereby 25% of a payment is tax free and the remaining 75% is taxable. Under Flexi Access Drawdown (FAD), you absolutely can choose how much is from the tax free segment and how much is from the taxable section - this (the tax efficiency) is one of the key benefits of FAD. However, not all pension providers have the functionality to facilitate this. Standard Life wrap, Aviva wrap and Royal London are three providers who do have this 'tailored drawdown' functionality. For example, you could have an individual with a net income target of £20,000 per year. Under FAD, you can draw £12,500 from the taxable part to fully utilise the personal allowance (0% tax) and make up the £7,500 shortfall from the tax free cash part. I think this sounds familiar very similar to what my advisor does and that's why I have an IFA and a wealth manager as I don't get this stuff. One more point
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Badger11

Beckenham 02 Oct 19 2.37pm

Originally posted by Goal Machine

I'm afraid this is quite right, YT. You are are referring to UFPLS (Uncrystallised funds pension lump sum) - whereby 25% of a payment is tax free and the remaining 75% is taxable.

However, not all pension providers have the functionality to facilitate this. Standard Life wrap, Aviva wrap and Royal London are three providers who do have this 'tailored drawdown' functionality.

For example, you could have an individual with a net income target of £20,000 per year. Under FAD, you can draw £12,500 from the taxable part to fully utilise the personal allowance (0% tax) and make up the £7,500 shortfall from the tax free cash part.

I think this sounds familiar very similar to what my advisor does and that's why I have an IFA and a wealth manager as I don't get this stuff.

One more point

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cryrst The garden of England 02 Oct 19 2.44pm
Originally posted by Goal Machine I'm afraid this is quite right, YT. You are are referring to UFPLS (Uncrystallised funds pension lump sum) - whereby 25% of a payment is tax free and the remaining 75% is taxable. Under Flexi Access Drawdown (FAD), you absolutely can choose how much is from the tax free segment and how much is from the taxable section - this (the tax efficiency) is one of the key benefits of FAD. However, not all pension providers have the functionality to facilitate this. Standard Life wrap, Aviva wrap and Royal London are three providers who do have this 'tailored drawdown' functionality. For example, you could have an individual with a net income target of £20,000 per year. Under FAD, you can draw £12,500 from the taxable part to fully utilise the personal allowance (0% tax) and make up the £7,500 shortfall from the tax free cash part. So basically one type you can draw the full amount of tax free 25% on day 1. The other you are taxed as you drawdown over your TFA.
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cryrst

The garden of England 02 Oct 19 2.44pm

Originally posted by Goal Machine

I'm afraid this is quite right, YT. You are are referring to UFPLS (Uncrystallised funds pension lump sum) - whereby 25% of a payment is tax free and the remaining 75% is taxable.

However, not all pension providers have the functionality to facilitate this. Standard Life wrap, Aviva wrap and Royal London are three providers who do have this 'tailored drawdown' functionality.

So basically one type you can draw the full amount of tax free 25% on day 1.
The other you are taxed as you drawdown over your TFA.

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cryrst The garden of England 02 Oct 19 2.49pm
Originally posted by Goal Machine I'm afraid this is quite right, YT. You are are referring to UFPLS (Uncrystallised funds pension lump sum) - whereby 25% of a payment is tax free and the remaining 75% is taxable. Under Flexi Access Drawdown (FAD), you absolutely can choose how much is from the tax free segment and how much is from the taxable section - this (the tax efficiency) is one of the key benefits of FAD. However, not all pension providers have the functionality to facilitate this. Standard Life wrap, Aviva wrap and Royal London are three providers who do have this 'tailored drawdown' functionality. For example, you could have an individual with a net income target of £20,000 per year. Under FAD, you can draw £12,500 from the taxable part to fully utilise the personal allowance (0% tax) and make up the £7,500 shortfall from the tax free cash part. Does this mean that if you defer your state pension you are on a winner as you can draw down your private pension 12.5k annual until it's gone then get your state pension. That way your income is zero before you draw down and in theory you pay no tax up until you claim the state pension.
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cryrst

The garden of England 02 Oct 19 2.49pm

Originally posted by Goal Machine

I'm afraid this is quite right, YT. You are are referring to UFPLS (Uncrystallised funds pension lump sum) - whereby 25% of a payment is tax free and the remaining 75% is taxable.

However, not all pension providers have the functionality to facilitate this. Standard Life wrap, Aviva wrap and Royal London are three providers who do have this 'tailored drawdown' functionality.

Does this mean that if you defer your state pension you are on a winner as you can draw down your private pension 12.5k annual until it's gone then get your state pension.
That way your income is zero before you draw down and in theory you pay no tax up until you claim the state pension.

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chris123 hove actually 02 Oct 19 3.37pm
Originally posted by cryrst Does this mean that if you defer your state pension you are on a winner as you can draw down your private pension 12.5k annual until it's gone then get your state pension. That way your income is zero before you draw down and in theory you pay no tax up until you claim the state pension. You used to be able to defer your state pension and accrue a real benefit - the accrual is less attractive now than it used to be - but state pension is taxable.
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chris123

hove actually 02 Oct 19 3.37pm

Originally posted by cryrst

You used to be able to defer your state pension and accrue a real benefit - the accrual is less attractive now than it used to be - but state pension is taxable.

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Goal Machine The Cronx 02 Oct 19 5.08pm
Originally posted by cryrst So basically one type you can draw the full amount of tax free 25% on day 1. The other you are taxed as you drawdown over your TFA. With FAD the main attraction is the flexibility. If you wish, you can draw the whole 25% tax free cash out in one go. Alternatively, you can gradually drip out the 25% tax free element to supplement your other income. Everyone has a £12,500 personal allowance which is 0% tax (except for for people earning over £150,000). The next £37,500 of taxable income is taxed at basic rate 20%. A common problem with those who don't take advice is that they withdraw the full 25% tax free cash "just because they can" - by doing this you are taking money out of a tax advantaged environment (the pension) which is most likely invested and growing, just to simply sit in their bank account. Money should be kept in the pension until its needed.
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Goal Machine

The Cronx 02 Oct 19 5.08pm

Originally posted by cryrst

So basically one type you can draw the full amount of tax free 25% on day 1.
The other you are taxed as you drawdown over your TFA.

With FAD the main attraction is the flexibility. If you wish, you can draw the whole 25% tax free cash out in one go. Alternatively, you can gradually drip out the 25% tax free element to supplement your other income.

Everyone has a £12,500 personal allowance which is 0% tax (except for for people earning over £150,000). The next £37,500 of taxable income is taxed at basic rate 20%.

A common problem with those who don't take advice is that they withdraw the full 25% tax free cash "just because they can" - by doing this you are taking money out of a tax advantaged environment (the pension) which is most likely invested and growing, just to simply sit in their bank account. Money should be kept in the pension until its needed.

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Goal Machine The Cronx 02 Oct 19 5.35pm
Originally posted by cryrst Does this mean that if you defer your state pension you are on a winner as you can draw down your private pension 12.5k annual until it's gone then get your state pension. That way your income is zero before you draw down and in theory you pay no tax up until you claim the state pension. Really depends on individual circumstances. I would be very wary of relying on the state pension as it is only £8,767 per year. You're in a precarious position if you have fully exhausted your private pension. The State Pension is taxable income, so you could draw down income of (£12,500 - £8,767) £3,733 per annum from your private pension and still be within the tax free personal allowance. The main benefits of flexi access drawdown are: - complete flexibility of income/capital. Ideal if circumstances change. - can be manipulated to minimise tax - on death, any remaining money can be passed to anyone (doesn't have to be a spouse). Furthermore it will be tax free if death occurs age 75. - tax free cash doesn't have to be taken at outset. - possibility of benefiting from investment growth, as money can remain invested. Drawbacks: - No guaranteed income (i.e. money could run out) - investment risk. Stock market returns are not guaranteed and should be considered long term investments. - more complex. Should really have ongoing financial advice unless you know what you are doing. -ongoing charges (pension administrator, investment charges and IFA charges - all in approx 1.2% - 1.75% per annum of assets under management) Drawdown is the most common route these days - roughly 2/3rds of people prefer this method since the introduction of pension freedoms. It's important to remember that Lifetime Annuities still exist as the main alternative and are usually more suitable for the 'cautious' individual. To briefly summarise with an Lifetime Annuity, you are in effect trading a large capital sum in exchange for a guaranteed income for life with an insurance company. The insurance (annuity) provider, based on the individuals age and health, gamble on the life expectancy and agree to pay a pre determined guaranteed income for life. For example: a healthy 65 year old could expect to exchange £100,000 capital for a guaranteed income for life of £5,000 per year (this assumes single life, nil guarantee, non increasing). Whereas an individual who had recently suffered a heart attack or a cancer might receive £7,500, as the insurer would expect them not to live as long as a healthy individual. One big problem with annuities currently is that rates are very unattractive and are at an all time low. It doesn't have to be one or the other, it can be a combination of the two. Pension planning is complex and if you're not sure, you should really consider getting professional advice. It will help you understand the options and the advice would be tailored to your personal circumstances. Worth paying a fee to get the right outcome and peace of mind. Went on a ramble there, apologies. Hopefully useful to someone out there! Edited by Goal Machine (02 Oct 2019 5.38pm)
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Goal Machine

The Cronx 02 Oct 19 5.35pm

Originally posted by cryrst

Really depends on individual circumstances. I would be very wary of relying on the state pension as it is only £8,767 per year. You're in a precarious position if you have fully exhausted your private pension.

The State Pension is taxable income, so you could draw down income of (£12,500 - £8,767) £3,733 per annum from your private pension and still be within the tax free personal allowance.

The main benefits of flexi access drawdown are:
- complete flexibility of income/capital. Ideal if circumstances change.
- can be manipulated to minimise tax
- on death, any remaining money can be passed to anyone (doesn't have to be a spouse). Furthermore it will be tax free if death occurs age 75.
- tax free cash doesn't have to be taken at outset.
- possibility of benefiting from investment growth, as money can remain invested.

Drawbacks:
- No guaranteed income (i.e. money could run out)
- investment risk. Stock market returns are not guaranteed and should be considered long term investments.
- more complex. Should really have ongoing financial advice unless you know what you are doing.
-ongoing charges (pension administrator, investment charges and IFA charges - all in approx 1.2% - 1.75% per annum of assets under management)

Drawdown is the most common route these days - roughly 2/3rds of people prefer this method since the introduction of pension freedoms. It's important to remember that Lifetime Annuities still exist as the main alternative and are usually more suitable for the 'cautious' individual.

To briefly summarise with an Lifetime Annuity, you are in effect trading a large capital sum in exchange for a guaranteed income for life with an insurance company. The insurance (annuity) provider, based on the individuals age and health, gamble on the life expectancy and agree to pay a pre determined guaranteed income for life.

For example: a healthy 65 year old could expect to exchange £100,000 capital for a guaranteed income for life of £5,000 per year (this assumes single life, nil guarantee, non increasing). Whereas an individual who had recently suffered a heart attack or a cancer might receive £7,500, as the insurer would expect them not to live as long as a healthy individual. One big problem with annuities currently is that rates are very unattractive and are at an all time low.

It doesn't have to be one or the other, it can be a combination of the two.

Pension planning is complex and if you're not sure, you should really consider getting professional advice. It will help you understand the options and the advice would be tailored to your personal circumstances. Worth paying a fee to get the right outcome and peace of mind.

Went on a ramble there, apologies. Hopefully useful to someone out there!

Edited by Goal Machine (02 Oct 2019 5.38pm)

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cryrst The garden of England 02 Oct 19 5.48pm
Originally posted by Goal Machine Really depends on individual circumstances. I would be very wary of relying on the state pension as it is only £8,767 per year. You're in a precarious position if you have fully exhausted your private pension. The State Pension is taxable income, so you could draw down income of (£12,500 - £8,767) £3,733 per annum from your private pension and still be within the tax free personal allowance. The main benefits of flexi access drawdown are: - complete flexibility of income/capital. Ideal if circumstances change. - can be manipulated to minimise tax - on death, any remaining money can be passed to anyone (doesn't have to be a spouse). Furthermore it will be tax free if death occurs age 75. - tax free cash doesn't have to be taken at outset. - possibility of benefiting from investment growth, as money can remain invested. Drawbacks: - No guaranteed income (i.e. money could run out) - investment risk. Stock market returns are not guaranteed and should be considered long term investments. - more complex. Should really have ongoing financial advice unless you know what you are doing. -ongoing charges (pension administrator, investment charges and IFA charges - all in approx 1.2% - 1.75% per annum of assets under management) Drawdown is the most common route these days - roughly 2/3rds of people prefer this method since the introduction of pension freedoms. It's important to remember that Lifetime Annuities still exist as the main alternative and are usually more suitable for the 'cautious' individual. To briefly summarise with an Lifetime Annuity, you are in effect trading a large capital sum in exchange for a guaranteed income for life with an insurance company. The insurance (annuity) provider, based on the individuals age and health, gamble on the life expectancy and agree to pay a pre determined guaranteed income for life. For example: a healthy 65 year old could expect to exchange £100,000 capital for a guaranteed income for life of £5,000 per year (this assumes single life, nil guarantee, non increasing). Whereas an individual who had recently suffered a heart attack or a cancer might receive £7,500, as the insurer would expect them not to live as long as a healthy individual. One big problem with annuities currently is that rates are very unattractive and are at an all time low. It doesn't have to be one or the other, it can be a combination of the two. Pension planning is complex and if you're not sure, you should really consider getting professional advice. It will help you understand the options and the advice would be tailored to your personal circumstances. Worth paying a fee to get the right outcome and peace of mind. Went on a ramble there, apologies. Hopefully useful to someone out there! Edited by Goal Machine (02 Oct 2019 5.38pm) You most certainly did not ramble GM Someone earlier on the brexit thread said HOL was just abuse and slagging off. I corrected them and this proves my points. This thread has helped me understand with all posters about my pension. I will talk to my advisor but thank you all for your advice. I hope others on here will also get a better understanding as one day hopefully all of us will make it to that decision of shall I shan't I draw some dough. I have just 2 half years until I make some decisions and this thread will help with that. R Cryrst
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cryrst

The garden of England 02 Oct 19 5.48pm

Originally posted by Goal Machine

The State Pension is taxable income, so you could draw down income of (£12,500 - £8,767) £3,733 per annum from your private pension and still be within the tax free personal allowance.

It doesn't have to be one or the other, it can be a combination of the two.

Went on a ramble there, apologies. Hopefully useful to someone out there!

Edited by Goal Machine (02 Oct 2019 5.38pm)

You most certainly did not ramble GM
Someone earlier on the brexit thread said HOL was just abuse and slagging off.
I corrected them and this proves my points.
This thread has helped me understand with all posters about my pension.
I will talk to my advisor but thank you all for your advice.
I hope others on here will also get a better understanding as one day hopefully all of us will make it to that decision of shall I shan't I draw some dough.
I have just 2 half years until I make some decisions and this thread will help with that.
R
Cryrst

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Goal Machine The Cronx 02 Oct 19 6.01pm
Originally posted by cryrst You most certainly did not ramble GM Someone earlier on the brexit thread said HOL was just abuse and slagging off. I corrected them and this proves my points. This thread has helped me understand with all posters about my pension. I will talk to my advisor but thank you all for your advice. I hope others on here will also get a better understanding as one day hopefully all of us will make it to that decision of shall I shan't I draw some dough. I have just 2 half years until I make some decisions and this thread will help with that. R Cryrst You’re very welcome Cryrst. Pension providers are working on ‘hybrid’ type products and have been since pension freedoms (not very successfully, might I add), so there might be some new options on the table in two and half years time.
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Goal Machine

The Cronx 02 Oct 19 6.01pm

Originally posted by cryrst

You’re very welcome Cryrst.

Pension providers are working on ‘hybrid’ type products and have been since pension freedoms (not very successfully, might I add), so there might be some new options on the table in two and half years time.

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