Section 32 Buyout pension - Drawdown?

Beesknees99

Hello

I have an old (1992) with profits s32 plan (now with Aegon)valued just under 100K and have an opportunity to take the tax free lump sum early (retirement age is 2016). This sum is greater than the usual 25% at about 43K. I would like to take this early for personal reasons.
Q. I would like to know whether my action will trigger an immediate income drawdown as I would rather the remaining 55K or so continue to be invested?
If it does, is there an alternative action to consider?
Thanks.

dunstonh

Q. I would like to know whether my action will trigger an immediate income drawdown as I would rather the remaining 55K or so continue to be invested?

If you want the increased tax free cash payment (granted under automatic transitional relief in 2006), then you have to take the income. If you dont want the income, then this will lead to you only getting 25% tax free cash (and loss of any guaranteed annuity rate that may well go with the S32).

jamesd

Is income drawdown rather than annuity purchase an option?

Beesknees99

I would rather avoid taking either option as I am 58 and still earning a salary. If I were to take 25% ta free only, does that mean I cannot take any further tax free amount in the future?

gjs6385

As stated above, if you take the tax free amount, this will be part of an option, the other part of which will be that you must take an income from it.

In short, you can't just take the tax free amount and leave the rest invested - it's all or nothing I'm afraid.

dunstonh

If you dont need it then dont take it. Defer it until you do need it. If there are GARs then that may even help. As long as it contractually doesnt have to end at 58 (i.e. it will still be subject to investment returns and the terms are available post 58) then there is no issue.

S32s got automatic transitional relief in 2006 to protect the tax free cash. If you want to do drawdown you will need to transfer it out of the S32 and that will lose your transitional relief.

jamesd

It seems that you couldn't take a further tax free lump sum in the same way that you could as a right now. However, you could transfer it, take the 25% lump sum, take an income using income drawdown and recycle that income into a personal pension. You could then take a lump sum from that new personal pension later. If you wait long enough that may then end up being enough to make up the difference in lump sum.

It's also worth considering the guaranteed annuity rate, if any, and seeing whether that applies and is good enough. We don't know why you have an opportunity to take the lump sum early or what you need it for so it's hard to say much that's specific about it.