We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
More pension changes - bad news?
gallygirl
Posts: 17,240 Forumite
"The Treasury is to give savers more freedom over how they take a tax-free lump sum from their pension pot.
Under current rules, from the age of 55 people can take 25% of pension savings as a tax-free lump sum.
But in future savers will be able to dip into their pension pot when they want, and each time 25% of what they take out will be tax-free."
http://www.bbc.co.uk/news/business-29606672
Also on Sky - but not saying if you can still elect to take a one-off 25% entirely tax free? Also if your 'dip-in' is less than your tax allowance if it will all be tax free? Or do they mean you can take out 25% of the pot and that amount will all be tax free rather than the way it's been worded above?
Am I missing something or is this new - and not necessarily good news?
Under current rules, from the age of 55 people can take 25% of pension savings as a tax-free lump sum.
But in future savers will be able to dip into their pension pot when they want, and each time 25% of what they take out will be tax-free."
http://www.bbc.co.uk/news/business-29606672
Also on Sky - but not saying if you can still elect to take a one-off 25% entirely tax free? Also if your 'dip-in' is less than your tax allowance if it will all be tax free? Or do they mean you can take out 25% of the pot and that amount will all be tax free rather than the way it's been worded above?
Am I missing something or is this new - and not necessarily good news?
A positive attitude may not solve all your problems, but it will annoy enough people to make it worth the effort
Mortgage Balance = £0
"Do what others won't early in life so you can do what others can't later in life"
0
Comments
-
Essentially it's a phased Taxfree cash entitlement as opposed to an upfront TFC. You can have either."The Treasury is to give savers more freedom over how they take a tax-free lump sum from their pension pot.
Under current rules, from the age of 55 people can take 25% of pension savings as a tax-free lump sum.
But in future savers will be able to dip into their pension pot when they want, and each time 25% of what they take out will be tax-free."
http://www.bbc.co.uk/news/business-29606672
Also on Sky - but not saying if you can still elect to take a one-off 25% entirely tax free? Also if your 'dip-in' is less than your tax allowance if it will all be tax free? Or do they mean you can take out 25% of the pot and that amount will all be tax free rather than the way it's been worded above?
Am I missing something or is this new - and not necessarily good news?Stephen Covey once said that "when you teach once, you learn twice". That is the primary reason for my participation on the forums as an IFA.
Although I strive to provide accurate information in my posts, there may be the odd time when I fail. Yes I know it's hard to believe but even Your Hero can make mistakes. Apologies in advance.0 -
At the moment you can either take 25% of the entire pot as a tax free lump, or segment the pot and take 25% of a smaller pot. The "uncrystalised" pot continues to be available for future 25% drawings, either as a whole or in part.
There is no obligation to draw any more than the 25% in each case, but if you do the excess will be taxed at your marginal rate.
(That's as I understand the current position, dependent on the individual pension provider's rules)
The recent statement that only 25% of whatever lump you take will be tax-free does appear to be a restriction, unless it has been badly worded.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
Still waiting on the official announcement to confirm this 100% but this probably isn't really anything completely new.
The Govt confirmed that something called an Uncrystallised Funds Pension Lump Sum (UFPLS) was being introduced a couple of months back. At the time many seem to have assumed that this would only be used for big one-off type payments.
The announcement confirms that the UFPLS can also be used to dip into pensions on a regular basis, for example to receive a regular monthly income of a specific amount leaving the rest of your pension untouched.
This is something that providers have been looking into since the UFPLS was first announced, it isn't new.
The Government has just sold it as something newly announced today to get a couple more press headlines - and it has worked!
It doesn't affect your ability to do anything that you could do previously.0 -
How does this differ from the phased drawdown already available?
oops sorry Sipp techie crossed posts.
This whole new pension freedom thing has been a bit of a revelation about pleb dazzling cynical chancellor?0 -
Phased drawdown leads to a crystallisation of a portion of your pension fund.How does this differ from the phased drawdown already available?
oops sorry Sipp techie crossed posts.
This whole new pension freedom thing has been a bit of a revelation about pleb dazzling cynical chancellor?
Whereas UFPLS does not. It is a straight withdrawal (like a bank account) and possibly less costly.Stephen Covey once said that "when you teach once, you learn twice". That is the primary reason for my participation on the forums as an IFA.
Although I strive to provide accurate information in my posts, there may be the odd time when I fail. Yes I know it's hard to believe but even Your Hero can make mistakes. Apologies in advance.0 -
Phased drawdown leads to a crystallisation of a portion of your pension fund.
Whereas UFPLS does not. It is a straight withdrawal (like a bank account) and possibly less costly.
That's interesting. I haven't seen it explained like that before.
So if the remaining fund continued to grow, then the amount available for later further 25% bites would increase too, whereas if the 25% had triggered crystalisation of remaining funds, subsequent growth would automtically only add to a crystalised pot so would be unavailable for further 25% bites?
Good point about where the personal allowance fits in to the 25% though. Would they both apply? Someone with no income could take 25% tax free plus personal allowance tax free?This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
Don't quite understand that sorry.Clifford_Pope wrote: »That's interesting. I haven't seen it explained like that before.
So if the remaining fund continued to grow, then the amount available for later further 25% bites would increase too, whereas if the 25% had triggered crystalisation of remaining funds, subsequent growth would automtically only add to a crystalised pot so would be unavailable for further 25% bites?
You are always allowed at least 25% of uncrystallised pots tax-free. So if you had £100,000 and you had crystallised £40,000 of the pot under phased drawdown (i.e. you took £10,000 lump sum, and placed £30,000 into drawdown) then you still have £60,000 uncrystallised funds of which you can still take 25% tax-free from.
Yes.Good point about where the personal allowance fits in to the 25% though. Would they both apply? Someone with no income could take 25% tax free plus personal allowance tax free?Stephen Covey once said that "when you teach once, you learn twice". That is the primary reason for my participation on the forums as an IFA.
Although I strive to provide accurate information in my posts, there may be the odd time when I fail. Yes I know it's hard to believe but even Your Hero can make mistakes. Apologies in advance.0 -
SippTechie wrote: »Still waiting on the official announcement to confirm this 100% but this probably isn't really anything completely new.
The Govt confirmed that something called an Uncrystallised Funds Pension Lump Sum (UFPLS) was being introduced a couple of months back. At the time many seem to have assumed that this would only be used for big one-off type payments.
The announcement confirms that the UFPLS can also be used to dip into pensions on a regular basis, for example to receive a regular monthly income of a specific amount leaving the rest of your pension untouched.
This is something that providers have been looking into since the UFPLS was first announced, it isn't new.
The Government has just sold it as something newly announced today to get a couple more press headlines - and it has worked!
It doesn't affect your ability to do anything that you could do previously.
This is exactly what I thought. Heard the news this morning and though "Don't we already know all this?"
My assumption is that I will be able to use my pot to draw yearly chunks at values that will best to suit my tax position. And that if, for example, I drew 13.3K and that was my only income it would be completely tax free - 10K tax allowange + 3.3K 25% tax free lump.0 -
I will bet this turns into yet another mis-selling scam.
Dodgy guy I know at football with no financial training or expertise is right now setting up a new business whereby he will visit people in order to persuade them to 'invest' their pension withdrawals into unregulated 'investments' such as one right now he is involved in - a Caribbean off-plan property development as ever supposedly bank guaranteed and backed by a billionaire (they always are) whereby people will part with large sums up front and the place may never get built.
Mark my words on this, I was an early canary in the coal mine on PPI mis-selling long before anyone knew what the heck I was on about.
Angela Knight was the bank spokes-person for years defending PPI sales, assuring us all the PPI industry was well ordered. I used to shout at the radio every time she was on seeking to allay consumer concerns.
She is now CE at the energy providers association once again defending bad practice with a straight face. The woman is lethal.
http://www.google.co.uk/imgres?imgurl=http://static.guim.co.uk/sys-images/Guardian/Pix/pictures/2012/4/2/1333394268433/Angela-Knight-008.jpg&imgrefurl=http://www.theguardian.com/business/2012/apr/02/angela-knight-british-bankers-association&h=174&w=290&tbnid=Xq5pRl1bUzI4gM:&zoom=1&tbnh=119&tbnw=199&usg=__UrCOTkK18KYtt0KrvsLlFDFY_TM=&docid=A12HSE-qDo7EMM&itg=1&ved=0CJABEMo3&ei=hfw8VJaqBI7Y7AaDyoCADQ
0 -
Don't quite understand that sorry.
.
At present if you take 25% of a pot or part of a pot tax free, the remaining 75% becomes crystalised. Any growth in the crystalised part becomes crystalised too - you can't have a further 25% bite from it.
But if the concept of crystalisation is abolished then there would be no distinction between remaining crystalised and uncrystalised funds, so if the fund grew, apparently the additional money could generate further 25% withdrawals.
In an extreme case, if the pot grew at 25% pa then one could draw 25% pa tax free indefinitely and the pot would stay the same size. It could actually happen with windfall property revaluation. So surely there must be some small print somewhere to stop that?
There's a different slant in the report in today's Telegraph. - "The first 25% withdrawn will not be taxed". 25% of what - that particular tranch, or of the whole fund?This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 352.2K Banking & Borrowing
- 253.6K Reduce Debt & Boost Income
- 454.3K Spending & Discounts
- 245.3K Work, Benefits & Business
- 601K Mortgages, Homes & Bills
- 177.5K Life & Family
- 259.1K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 37.7K Read-Only Boards