questions re changes to pensions and annuities

middlepuss

Loughton_Monkey wrote: »

But given that all these providers have, by law, to deduct tax, they all need code numbers, and so HMRC will obviously know the income when dishing out the tax codes - which will have to include the drawdown provider.

Does that mean if you draw income from a SIPP that the SIPP manager deducts basic rate tax and pays to you net of tax? (And with a tax credit, as with a dividend..?)

And if you get a quote for annuity income, is the amount they quote gross or net of basic rate tax?

Loughton_Monkey

middlepuss wrote: »

Does that mean if you draw income from a SIPP that the SIPP manager deducts basic rate tax and pays to you net of tax? (And with a tax credit, as with a dividend..?)

And if you get a quote for annuity income, is the amount they quote gross or net of basic rate tax?

On drawdown, I don't have one so cannot speak with authority. But my firm understanding is that the drawdown provider will deal with tax just the same as any other pension provider. [That's probably why they charge for paying you].

As for a pension annuity, they always quote the gross. But when you take the annuity, they will deduct tax exactly to 'Code Number' specification.

Soon2B

Can anyone explain to me why the £20k qualifying pension income needs to be "in payment" before access to flexible drawdown is allowed? I have 2 inflation linked final salary pensions which together exceed £20k on current valuation & will be payable when I reach 60 + a money purchase pot which I would like to start drawing down now so that I can retire early (age 56). Why shouldn't I be able to do that? My final salary schemes are never going to go away, so I will never become state dependent. I don't understand the logic?

taking_stock

'the £20k has to be already in payment' was just one of a number of measures designed to make the pension rules 'simple'!! the idea was that it would be easier to apply the rule across the board than to institute a process of checking future pension entitlements from company and state. however, i agree with you, it would only be a tiny bit harder than the checking of annuity income that still needs to be done for the MIR (£20k) in payment.

Soon2B

Thanks taking stock. If the degree of additional difficulty is minimal and there are significant benefits to counting garunteed future pension income into the £20k calculation do you think the consultation period might result in a change of approach?

Loughton_Monkey

Soon2B wrote: »

Can anyone explain to me why the £20k qualifying pension income needs to be "in payment" before access to flexible drawdown is allowed? I have 2 inflation linked final salary pensions which together exceed £20k on current valuation & will be payable when I reach 60 + a money purchase pot which I would like to start drawing down now so that I can retire early (age 56). Why shouldn't I be able to do that? My final salary schemes are never going to go away, so I will never become state dependent. I don't understand the logic?

I think it is because - in theory at least - you could (a) rape your drawdown scheme to its maximum and therefore you have converted all this money to cash, then (b) defer your company schemes indefinitely, and then in the intervening period, you could claim benefits.

I may be wrong, but I think you could qualify for some benefits if you have only a small amount of cash. The fact that you have hudreds of thousands stashed in 'untaken pensions' probably remains a loophole.

middlepuss

Look at it from the bureaucrats' point of view:

Do you have pensions income (ie income that is not going to go away) of over £20K? Yes? Then you won't be a drain of the State and you can do what you like with your SIPPs etc. No? Oh, dear, you might be a drain on the State so no, you can't draw out your SIPP pot and blow it. Shimple.