Lump at 50, what about the 75%

MollyCoddle_2

I have two PPs, one holds all my Protected Roghts(PR). approx 25k each

As I am 50, I am determined to take both 25% lump sums, what can happen to the other 75% in both the Private contribution pot and PR pot?, can I;-

a. leave the remainder in the PP until later, or am I forced into CP annuity OR other compulsory action?

b. Continue to contribute to the pots?

scheme rules permitting obviously!!

Regards

Molly

dunstonh

you can do a and b. You are not forced to buy an annuity.

However, the providers you are with now may not let you do it with the pensions you have (especially if they were taken out pre 2006 or are stakeholder pensions). You will need to transfer to a personal pension/drawdown plan (or SIPP after october).

Remember that cystallising your benefits and taking the 25% will reduce death benefits and you only get one bite of the cherry for those fund. You cannot take another 25% 10 years down the road even if the fund value is two or three times more (future contribuions are treated as uncrystallised and can have 25% taken later).

MollyCoddle_2

Thank you dunstonh,

Both of my pots were set up by the providers under the title of SIPPs (yes I understand about PR and SIPPs. I assume the PR pot is in fact a PR PP).

Can I check my understanding of your response in light of the above?:-

1. the remaining 75% will be taxed, the resulting sum will be available for investment along with future contributions.

2. Future contributions will be considered for further 25% withdrawals.

3. The PR PP being pre 2006 will need to be transfered to another scheme before it will be considered for lump withdrawal.

I undrestand no advice is being offered by your responses, merely information.

regards,

Molly

dunstonh

1. the remaining 75% will be taxed, the resulting sum will be available for investment along with future contributions.

The investment itself is still tax free but on death it suffers a 35% tax penalty (none on the uncrystallised bit from new contributions).

2. Future contributions will be considered for further 25% withdrawals.

yes. think of the pension being put into two segments, one a crystallised segment and the new contributions going into the uncrystallised segment.

3. The PR PP being pre 2006 will need to be transfered to another scheme before it will be considered for lump withdrawal.

Nope. They should be able to crystallise it now if the scheme allows it.

Old schemes will almost not allow the changes. SIPPs have as have many of the post 2006 personal pensions. If you were in one of the older schemes that doesnt allow it then you would have to transfer the pension to one that does. However, you shouldnt have that problem with a SIPP.

EdInvestor

MollyCoddle wrote: »

1. the remaining 75% will be taxed, the resulting sum will be available for investment along with future contributions.

It's only taxed when you take it out as income (or when you die, as above).It's not a requitrement to take any income until age 75.The max income you can take is 120% of the annuity rate.

3. The PR PP being pre 2006 will need to be transfered to another scheme before it will be considered for lump withdrawal.

Is this PR money invested in cash? That's the only way it could actually be in a SIPP now.If it is in cash, you can put it into drawdown now, taling the lump sum.As of October you will be able to invest the remainder in the usual way, no restiction to cash.

MollyCoddle_2

Thanks dunstonh and EdInvestor

The PR assests are in gilts and cash in a seperate pot, as I stated these PR funds are erroneously labelled a SIPP by the provider. I treat them as a PR PP, sorry if I have confised.

EdInvestor in light of this can you clarify

EdInvestor wrote: »

Is this PR money invested in cash? That's the only way it could actually be in a SIPP now.If it is in cash, you can put it into drawdown now, taling the lump sum.As of October you will be able to invest the remainder in the usual way, no restiction to cash.

As I did not consider myself for drawdown if I merely wanted a cash lump sum at 50 from both pots, I have not researched this topic at all. Can you explain any drawdown possibilities or refer me to a specific thread?

Thanks to both again

MollyC

EdInvestor

If your PR money is invested in cash and gilts then it may well be in a SIPP.SIPPs are in fact allowed to hold PR money now but it can only be invested in cash and gilts, so most people regarded this as an effective ban..Ask your provider to clarify.

In order to take the 25% tax free cash from the pension you must "take benefits" from the fund by putting it into drawdown. Since 2006 the drawdown rules have allowed you to take no income from the remainder, but you still have to put the fund into drawdown to get the TFC.

MollyCoddle_2

We have discussed those remainder drawdown funds being 'ringfenced' till at latest 75.

Can you explain the basics of drawdown?, things like:-

After TFC, are the remainder funds assets converted to cash?
If so, does that happen immediately?(as aprt of TFC extraction)
or can already suffieient cash meet the TFC?, allowing the other assets
in the fund to work away.
Can the provider arrange this themselves?
Typical fees?, one off or reoccurring?
Does this mean these funds are inextricably linked to the provider?


Sorry for the ignorance on drawdown, any references to previous threads?

Thanks again,

MollyC

dunstonh

After TFC, are the remainder funds assets converted to cash?

No. You get the same investment choice you had before.

Can the provider arrange this themselves?

Providers will only act on instructions from you or your IFA. They will do nothing off their own back.

Typical fees?, one off or reoccurring?

Depends on the contract terms and what level of servicing you have, if any. Drawdown often adds a very small charge but nothing to be concerned with.

Does this mean these funds are inextricably linked to the provider?

No. You can transfer cystallised funds to other pensions that accept crystallised funds.

EdInvestor

It would be helpful in recommending alternative competitive drawdown providers if you tell us who is your current SIPP provider and what your main (non-PR) pension fund is invested in.

MollyCoddle_2

Thanks again dunstonh, very helpful.

dunstonh quote:-
"Providers will only act on instructions from you or your IFA. They will do nothing off their own back."
My confusion, I meant is the drawdown process so straightforward that the current provider can handle it easily and does need to add in consultation/3rd party fees.

If my scheme allows all that you have detailed, I have no need to move my cristalised funds elsewhere.
Are there any major problems that are to be monitored during this process, or are most providers efficient and decent?


EdInvestor, Sorry if my posts have mislead, I'm looking for an educational discussion not advice, thats what IFA's are for, thanks anyway. My current assets are in cash, shares and corporate bonds. I guess this is quite standard