Financial Planner - Typical Charges?

Toki

Anyone, dunstonh possibly, be able to answer the post above?


Does this mean the 25% tax free amount (approx £15k in this case) could be kept within the Standard Life pension and spread across the year (or longer) rather than the lump sum option?

jem16

Toki wrote: »

Anyone, dunstonh possibly, be able to answer the post above?

Dunstonh answered you on the 12th but for some strange reason the post has only shown up now when you made your post.

Toki

jem16 wrote: »

Dunstonh answered you on the 12th but for some strange reason the post has only shown up now when you made your post.

How strange, thank jem16 and dunstonh again!

Toki

dunstonh wrote: »

That is effectively phased income drawdown and means that only part of the fund is crystallised each time but 25% is taken with transaction. So, no complaint there.

Phased drawdown is quite a good method for people that dont need capital and are looking for income whilst maintaining as much tax free death benefit as possible.

Excuse my ignorance dunstonh, what do you mean by " 25% is taken with transaction" Does this mean the 25% is put into the new pension but remains tax free and can be taken on an ongoing basis?

Thanks again.

jem16

Toki wrote: »

Does this mean the 25% is put into the new pension but remains tax free and can be taken on an ongoing basis?

Basically yes. It also means that the tax-free cash can actually grow as the investment grows - could of course go down too.

In its simplest form, you only crystallise part of the pension each time.

This might help explain it.

http://www.pensionsandannuities.co.uk/Phased_Income_Drawdown.htm

dunstonh

Toki wrote: »

Excuse my ignorance dunstonh, what do you mean by " 25% is taken with transaction" Does this mean the 25% is put into the new pension but remains tax free and can be taken on an ongoing basis?

Thanks again.

Instead of crystallising the whole pension, you only crystallise a portion of it. You use the 25% tax free cash on the portion you crystallise to provide part of the income with an income withdrawal covering the rest. You do that each year

Say you have a pension of £400k, if you crystallised just £40k of it, then you would have £10,000 tax free lump sum. Around £2500 income could also be taken. So, if you used the lump sum for income purposes, then you have a tax free income on the bulk or maybe even all of it..

e.g. someone with £7000 state pension and £9940 personal allowance on above example would be:

£10k tax free cash
£7000 state pension
£2500 taxable income but fully within personal allowance.
Total: £19,500 income tax free.

You then repeat the process each year on a reducing basis (as income taken will be compounded).

Toki

dunstonh wrote: »

Instead of crystallising the whole pension, you only crystallise a portion of it. You use the 25% tax free cash on the portion you crystallise to provide part of the income with an income withdrawal covering the rest. You do that each year

Say you have a pension of £400k, if you crystallised just £40k of it, then you would have £10,000 tax free lump sum. Around £2500 income could also be taken. So, if you used the lump sum for income purposes, then you have a tax free income on the bulk or maybe even all of it..

e.g. someone with £7000 state pension and £9940 personal allowance on above example would be:

£10k tax free cash
£7000 state pension
£2500 taxable income but fully within personal allowance.
Total: £19,500 income tax free.

You then repeat the process each year on a reducing basis (as income taken will be compounded).

Thanks, makes perfect sense now. Going to advise my dad to go ahead, doesn't sound like she is giving incorrect advice after all. I am too sceptical sometimes!