Income Drawdown rules

SallyG

What legislation/ S.I. regulations apply to income drawdown?

Once you've put a pension fund into capped income drawdown and taken tax free cash and taxable drawdown payments can you still invest the remaining drawdown fund in any other type of personal pension you choose ?
Could I put some of my drawdown fund into a new intact "unvested" pension which could be inherited tax free?

CannySaver_2

SallyG wrote: »

Once you've put a pension fund into capped income drawdown and taken tax free cash and taxable drawdown payments can you still invest the remaining drawdown fund in any other type of personal pension you choose ?
Could I put some of my drawdown fund into a new intact "unvested" pension which could be inherited tax free?

No, once it is in Income Drawdown it can't go back to being an unvested Personal Pension, it can only be moved to another Income Drawdown plan or an Annuity.

Once you vest (or attain the age of 75 without vesting) the fund on death, if a lump sum is chosen by beneficiaries, will be taxed at 55%.

One way round this is to take the income, pay tax, and then make a new pension contribution into an unvested plan. This works fine and achieves your goal, providing (a.) you don't need the income and (b.) have pensionable earnings.

The Canny Saver

SallyG

Thanks Canny.
I've looked back through the questions I put to SW before going into drawdown: the sales agent confirmed in an email that I could go into SW drawdown and then revert to the SW Stakeholder I'd started off in [as a quick fix after pension sharing on divorce].
My question to SW agent was:
"If I did income drawdown with SW:- could I later move my pension fund back into the SW Stakeholder pension?
If so - would there be a charge?"
SW agent replied :
"3. You can transfer the "drawdown fund" back to stakeholder as it is now a different entity, the pension has been "opened" and now follows different rules. But I would question what the benefit of transferring back to stakeholder would be?"

You're saying that information was incorrect?
We talked quite a lot about my not wanting to do anything irreversible - eg an annuity because I was such a pension novice.

This couldn't just be a matter of SW scheme rules - it's prohibited under pension legislation?

dunstonh

You're saying that information was incorrect?

sort of but not at the same time.

Generically, you can transfer crystallised pension benefits to another pension scheme. That includes stakeholder pensions. The rules allow it and it is generically correct. However, the retail market doesnt have a stakeholder pension that does drawdown. Scottish Widows are tied agents and can only talk generically. So, the information given by SW is correct generically and within their limited remit. If an IFA had said that then it would clearly be incorrect as an IFA doesnt need to talk generically.

SallyG

When I asked the SW agent about being able to put my pension fund back into a stakeholder I meant was I going to be able to exit drawdown and go back to being in an ordinary pension fund.
You're saying that although she'd hard evidence I was a complete pension novice and irrevocability-averse , the SW agent assumed without checking that I fully understood what I have only now discovered : that drawdown is just as irrevocable as buying an annuity.

dunstonh

When I asked the SW agent about being able to put my pension fund back into a stakeholder I meant was I going to be able to exit drawdown and go back to being in an ordinary pension fund.

That question is clear cut. Once you crystallise a pension then that is for good. No going back. it can generically go back from a drawdown plan into a personal pension, SIPP or theoretically a stakeholder but it remains crystallised rather than uncrystallised.

You're saying that although she'd hard evidence I was a complete pension novice and irrevocability-averse , the SW agent assumed without checking that I fully understood what I have only now discovered : that drawdown is just as irrevocable as buying an annuity.

You were warned at the time by this board that using a tied company on the basis you were doing it was wrong.