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  • FIRST POST
    • ProDave
    • By ProDave 12th Jan 18, 9:17 AM
    • 531Posts
    • 599Thanks
    ProDave
    Transfering then drawing a pension at age 55
    • #1
    • 12th Jan 18, 9:17 AM
    Transfering then drawing a pension at age 55 12th Jan 18 at 9:17 AM
    I have a small personal pension from a previous employment currently valued at a few pounds under £30K It was originally taken out with Friends life under a scheme organised by that employer, and has now been absorbed into the Aviva group.

    I reach the magic age of 55 in March and I want to unlock, and start "drawing" this pension, mainly to release to me the 25% tax free lump sum. I do NOT want to buy an annuity with it, I want more flexibility.

    I have spoken to Aviva and they say drawdown is not an option with them, all they offered me was take the lot and pay the tax, or take an annuity. I asked them for an example and all they sent me was a statement of the funds value. I have decided they are a waste of space, can't carry out a simple instruction, and too inflexible.

    So I want to move it to somewhere with more options and easier to deal with. I have confirmed there are no exit fees if I transfer it to another provider.

    Hargreaves Lansdown is a company I see recommended often. Their Vantage SIPP seems to tick the boxes. I have been told the procedure is to transfer the fund to them, into the Vantage SIPP then when I reach 55 transfer it to a drawdown package thus releasing the 25% tax free lump.

    They tell me I do not have to take anything out of the drawdown immediately. Instead, I expect in a few years time when I retire (at 60) I will have a period where my income will be below the income tax threshold so if I draw it then most of it can be drawn tax free at that stage.

    Before I post the transfer forms to HL is there anything in my summary above that is wrong, or any reason not to use HL for this (if so who better do you recommend?)
    Last edited by ProDave; 12-01-2018 at 9:19 AM.
Page 1
    • OldMusicGuy
    • By OldMusicGuy 12th Jan 18, 9:39 AM
    • 256 Posts
    • 482 Thanks
    OldMusicGuy
    • #2
    • 12th Jan 18, 9:39 AM
    • #2
    • 12th Jan 18, 9:39 AM
    I have a Vantage SIPP and afaik everything you have stated is correct. Customer service from HL has always been top notch for me, the range of funds is excellent and the website is very good. It's easy to manage funds. The only thing to watch are the charges. They are not the cheapest platform out there with a starting platform fee of .45%, so just make sure you have compared their charging structure with other platforms before committing.

    FWIW my wife has a small DC pot with Zurich and we will be transferring that to HL .
    • Mnd
    • By Mnd 12th Jan 18, 10:14 AM
    • 338 Posts
    • 355 Thanks
    Mnd
    • #3
    • 12th Jan 18, 10:14 AM
    • #3
    • 12th Jan 18, 10:14 AM
    Your situation is exactly what we have done with my wife's pension fund

    1 word of caution..do not take any of the money over and above the tax free money if you intend to make contributions in the future. You will be restricted to 4k a year if you do
    • ProDave
    • By ProDave 12th Jan 18, 10:19 AM
    • 531 Posts
    • 599 Thanks
    ProDave
    • #4
    • 12th Jan 18, 10:19 AM
    • #4
    • 12th Jan 18, 10:19 AM
    Thanks

    I don't intend to pay any more in, I am at the stage in life of taking out. I have a final sallary pension to look forward to when I reach 60, and should have a lot of equity released from the house soon in he process of downsizing.
    • OldMusicGuy
    • By OldMusicGuy 12th Jan 18, 11:41 AM
    • 256 Posts
    • 482 Thanks
    OldMusicGuy
    • #5
    • 12th Jan 18, 11:41 AM
    • #5
    • 12th Jan 18, 11:41 AM
    Us also, we are taking out now, not putting in (apart from the minimum allowed in a SIPP).
    • NorthernGeezer
    • By NorthernGeezer 12th Jan 18, 12:32 PM
    • 39 Posts
    • 5 Thanks
    NorthernGeezer
    • #6
    • 12th Jan 18, 12:32 PM
    • #6
    • 12th Jan 18, 12:32 PM
    How easy is it to set up your HL SIPP and transfer money from your existing fund?
    Is it a paper application or electronic?
    My current provider subscribes to an electronic transfer system called ORIGO and have told me that if the company you use to 'transfer in' uses it too, you only have to do an electronic application with the new provider.
    • Mnd
    • By Mnd 12th Jan 18, 1:47 PM
    • 338 Posts
    • 355 Thanks
    Mnd
    • #7
    • 12th Jan 18, 1:47 PM
    • #7
    • 12th Jan 18, 1:47 PM
    We used hargreaves lansdown for the transfer from reassure...all online easy peasy
    To get the 25% tax free (we've only partially doing that) they send a form, like risk awareness to make sure you know what you are doing..send that back and then you get the application form.fill that in and send back (this is where we are now) yesterday they asked for proof of age for my wife, just had to email a photo of her passport and it's proceeding fine
    Hl are also very helpful, always get back about messages so give them a ring
    • ProDave
    • By ProDave 12th Jan 18, 2:26 PM
    • 531 Posts
    • 599 Thanks
    ProDave
    • #8
    • 12th Jan 18, 2:26 PM
    • #8
    • 12th Jan 18, 2:26 PM
    Interesting.

    I found to open the HL vantage SIPP I had to fill in a form with a pen and post it. I even asked them if there was an on line application and they said no. The best they can offer is you can download the form to print and fill in and post but you can't submit it on line.

    I understand that once open, you manage it on line.

    Can I ask those that have transferred another pension into a HL SIPP, how ling did it take from posting the application form?

    The other annoying quirk of the rules, is they say I can't apply to put it in drawdown untill I actually reach 55. Now I fully understand I can't draw any until I am 55, but I would have thought you could do the paperwork in advance so that on my 55th birthday they could send me the 25% tax free lump, but it looks like I can only initiate the paperwork on my 55th birthday so there will be a short delay before I get the lump sum.
    • Flu strength Darren
    • By Flu strength Darren 12th Jan 18, 3:39 PM
    • 10 Posts
    • 0 Thanks
    Flu strength Darren
    • #9
    • 12th Jan 18, 3:39 PM
    • #9
    • 12th Jan 18, 3:39 PM
    Just transferred one to HL, it took about 8 working days from signing the consent form, really easy.
    • AnotherJoe
    • By AnotherJoe 12th Jan 18, 3:47 PM
    • 7,905 Posts
    • 8,498 Thanks
    AnotherJoe
    Another one using HL to get the 25% lump sum.
    You end up with two SIPPs one called “SIPP income drawdown” and one called “SIPP.” which is the original and empty and just left for historical purposes so you can look at its history.

    Don’t forget to pay your £2880 a year into your remaining SIPP to get your free £720
    Last edited by AnotherJoe; 12-01-2018 at 3:52 PM.
    • NorthernGeezer
    • By NorthernGeezer 12th Jan 18, 3:56 PM
    • 39 Posts
    • 5 Thanks
    NorthernGeezer
    Where has this figure of £2880 come from?
    £2880 + £720 = £3700, i thought the annual allowance was £4000?
    • Linton
    • By Linton 12th Jan 18, 4:29 PM
    • 8,863 Posts
    • 8,900 Thanks
    Linton
    Where has this figure of £2880 come from?
    £2880 + £720 = £3700, i thought the annual allowance was £4000?
    Originally posted by NorthernGeezer
    Anyone can contribute £3600 gross into a pension, even if not earning, £3600 gross = £2880 net.

    The normal annual allowance is £40K but any personal contributions must be covered by earned income. Once you have drawn down taxable (possibly at 0%) money from a DC pension the annual allowance drops to £4K.
    • ProDave
    • By ProDave 12th Jan 18, 4:51 PM
    • 531 Posts
    • 599 Thanks
    ProDave
    Another one using HL to get the 25% lump sum.
    You end up with two SIPPs one called “SIPP income drawdown” and one called “SIPP.” which is the original and empty and just left for historical purposes so you can look at its history.

    Don’t forget to pay your £2880 a year into your remaining SIPP to get your free £720
    Originally posted by AnotherJoe
    Thanks.

    While "on the way in" you get 20% added, it will then be taxable "on the way out" when you draw it later on. So you are taking a gamble that at the time you draw it, the basic rate of tax is less than 20% or you are a low earner below the tax threshold so some or all of it may be tax free.

    I only have a short window between my expected retirement age (60 when my largest final salary pension starts to pay out) and when my state pension pays out 7 years later (which will definitely make me a tax payer again) I plan to draw down the remainder of this pension in that time meaning at least some of it will be free of tax. I will struggle to get all of what is already there out in that "tax free window" so I know any more I pay in would be taxable at the basic rate on the way out.

    Useful advice none the less.
    • AnotherJoe
    • By AnotherJoe 12th Jan 18, 5:13 PM
    • 7,905 Posts
    • 8,498 Thanks
    AnotherJoe
    Where has this figure of £2880 come from?
    £2880 + £720 = £3700, i thought the annual allowance was £4000?
    Originally posted by NorthernGeezer
    Maybe in your universe
    In mine, it equals £3600

    i thought the annual allowance was £4000?
    Originally posted by NorthernGeezer
    Different thing
    • AnotherJoe
    • By AnotherJoe 12th Jan 18, 5:15 PM
    • 7,905 Posts
    • 8,498 Thanks
    AnotherJoe
    Thanks.

    While "on the way in" you get 20% added, it will then be taxable "on the way out" when you draw it later on. So you are taking a gamble that at the time you draw it, the basic rate of tax is less than 20% or you are a low earner below the tax threshold so some or all of it may be tax free.
    Originally posted by ProDave
    Doesn't seem like much of a gamble if you know you wont be earning !

    I only have a short window between my expected retirement age (60 when my largest final salary pension starts to pay out) and when my state pension pays out 7 years later (which will definitely make me a tax payer again) I plan to draw down the remainder of this pension in that time meaning at least some of it will be free of tax. I will struggle to get all of what is already there out in that "tax free window" so I know any more I pay in would be taxable at the basic rate on the way out.
    Originally posted by ProDave
    Even if you pay tax on the £3600 you still end up (IIRC) £120 better off EDIT FIX £180 . Better than a slap in the face with a wet salmon.

    Like you I wont be earning next few years so no tax to be paid at all on what i take out as long as its below the annual limit.

    UPDATE EDIT:

    ps I spoke to HL, if you want to pay more money in, they open back up your original SIPP and thats what you pay the new money into. That way it can be kept segregated. Thats what I've just done.
    Last edited by AnotherJoe; 14-01-2018 at 11:00 PM.
    • ProDave
    • By ProDave 12th Jan 18, 5:36 PM
    • 531 Posts
    • 599 Thanks
    ProDave
    Even if you pay tax on the £3600 you still end up (IIRC) £120 better off. Better than a slap in the face with a wet salmon..
    Originally posted by AnotherJoe
    On the way in, you get credited with £720. When you draw your £3600 tax at 20% = £720 so you are no better off

    I guess you will have had that £720 on free loan for however many years so any gain that has made will be yours so probably worthwhile.

    I will have money to invest in a few years so this is something to look into along with ISA's etc.
    • NorthernGeezer
    • By NorthernGeezer 12th Jan 18, 5:52 PM
    • 39 Posts
    • 5 Thanks
    NorthernGeezer
    AnotherJoe
    Maybe in your universe, In mine, it equals £3600
    Your right Joe, maths aint my strongest subject but then again i do suffer from Dyscalculia (Google it)

    ProDdave
    While "on the way in" you get 20% added, it will then be taxable "on the way out" when you draw it later on. So you are taking a gamble that at the time you draw it, the basic rate of tax is less than 20% or you are a low earner below the tax threshold so some or all of it may be tax free.
    As a non-earner surely the £3600 is the correct figure and as long as you stay below your tax threshold on withdrawals you will be ok?
    • westv
    • By westv 12th Jan 18, 5:52 PM
    • 4,422 Posts
    • 2,045 Thanks
    westv
    On the way in, you get credited with £720. When you draw your £3600 tax at 20% = £720 so you are no better off

    I guess you will have had that £720 on free loan for however many years so any gain that has made will be yours so probably worthwhile.

    I will have money to invest in a few years so this is something to look into along with ISA's etc.
    Originally posted by ProDave
    25% of the £3,600 is tax free so, no, you don't pay £720 tax.
    • Dazed and confused
    • By Dazed and confused 12th Jan 18, 6:02 PM
    • 2,092 Posts
    • 944 Thanks
    Dazed and confused
    Only £2700 of the £3600 is taxable income so most will pay £540 (£567 from April) in tax but will have received £720 in tax relief.

    And outside Scotland it will still be £540 for basic rate payers after 5 April 2018.
    • ProDave
    • By ProDave 12th Jan 18, 7:19 PM
    • 531 Posts
    • 599 Thanks
    ProDave
    25% of the £3,600 is tax free so, no, you don't pay £720 tax.
    Originally posted by westv
    Bingo, it makes sense now.

    So you get £720 tax relief on the way in, pay 540 tax on the way out, so "gain" £180 in the exercise. So a gain of 8% of what you put in.

    What I had missed was this is additional input to the SIPP so qualifies for the 25% tax free. So certainly when I get my lump sum to invest in a few years it looks to be worth putting more int the SIPP
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