New Pension Drawdown Rules today.

jamesd

BeatTheSystem wrote: »

At age 55 without further contributions at 7% growth the fund value should be 1,710K ... It seems sensible to apply for fixed protection before April 2012.

I agree.

BeatTheSystem wrote: »

Do you know if I can I contribute between now and then or should contributions cease now?

You can contribute until you apply for the protection. When you apply you declare that you will not make or allow to be made any more contributions into a pension in your name, which means doing things like opting out of getting new employer contributions, except for some defined benefit cases.

BeatTheSystem wrote: »

I am not sure what to do regarding contributions, it is not guaranteed that the fund will grow at 7% each year every year for the next 13 years (until age 55). Makeing large employer contributions is incredibly tax efficient still.

Contribute until you apply. If you later find that there's a need to top it up you can do that, though as soon as you do you lose the protection and are subject to the lower limit.

7% is a pretty easy long term target for someone with a medium or higher risk tolerance.

You might also look into VCT or even EIS use if they are appropriate for your risk tolerance.

The charge for going over the limit is only intended to recover the income tax. If you're saving NI and perhaps business taxes as well it may still be efficient to use the pension.

BeatTheSystem wrote: »

Once again thanks, you seem to know your stuff...

I was curious, so I did some research.

jayjays

Hi,

You guys appear to have all the facts ref flexible drawdown , so hopefully one of you can enlignten me on my personal situation........

I am 54 years old.
I have a company pension of £31k.
I am considering returning to work for a year, but dont want to pay 40% tax.
I would like to invest anything I earn over circa £7k in flexible draw down (probably around £27k).

My understanding ...........
I have to invest in a stock market based product?
At age 66, I can draw down the £27k (or whatever it's worth) to zero over a 10 year period, subject to 20% tax?

If my assumptions are correct, where would my £27k be best invested considering my view on investments is "as little risk as possible"

Any help would be very much appreciated.

Gatser

jayjays wrote: »

Hi,

You guys appear to have all the facts ref flexible drawdown , so hopefully one of you can enlignten me on my personal situation........

I am 54 years old.
I have a company pension of £31k.
I am considering returning to work for a year, but dont want to pay 40% tax.
I would like to invest anything I earn over circa £7k in flexible draw down (probably around £27k).

My understanding ...........
I have to invest in a stock market based product?
At age 66, I can draw down the £27k (or whatever it's worth) to zero over a 10 year period, subject to 20% tax?

If my assumptions are correct, where would my £27k be best invested considering my view on investments is "as little risk as possible"

Any help would be very much appreciated.

Jayjays... you are asking quite a detailed set of questions here.
From my experience you will get a better response if you ask one question at a time...then piece it all together.
Its your decision at the end of the day.

Why not have one or two (free) initial meetings with IFA's too?

jayjays

Cheers Gat, have decided on a free IFA review...........as long as I get into a sound investment, a 12 month return to work looks very tempting , except for the early mornings :-(

Loughton_Monkey

jayjays wrote: »

I am 54 years old.
I have a company pension of £31k.
I am considering returning to work for a year, but dont want to pay 40% tax.
I would like to invest anything I earn over circa £7k in flexible draw down (probably around £27k).

My understanding ...........
I have to invest in a stock market based product?
At age 66, I can draw down the £27k (or whatever it's worth) to zero over a 10 year period, subject to 20% tax?

As long as your company pension is greater than £20K per year, then yes, you can invest all your earnings into a new pension. You do not literally 'invest in a drawdown'. You simply invest in a pension. At any age you choose (after 55) when you have stopped paying into any pensions, you can take 25% of that new pension fund tax free, and put the rest into 'flexible drawdown'.

The minute you have put it into flexible drawdown, you can draw it down at any rate you choose. All at once if you wanted. However, it could be a little silly to do that. In practice, you would draw it down at whatever rate is required to bring you just a penny below the 40% tax bracket bearing in mind all your taxable income.

You do not have to invest in a stock market related investment. There are a few 'cash based' 'investments' available under SIPPS but they would pay a miserable interest. But there are cautious funds or fixed interest funds available - but almost all would have an element of volatility.

jayjays

Thanks Monkey , thats great news , in fact I'me going to try & get a head start & put a bit in this tax year

Thanks again