How can I unlock my pension?

JRRHartley

I have a pension with a fair amount invested. I am appalled at the cost of buying an annuity, drawdown levels are decreasing annually, not to mention the 55% tax when I pass my money on to my kids!

Does anyone have any ideas on this?

dunstonh

I am appalled at the cost of buying an annuity

The cost of buying an annuity is quite cheap.

drawdown are levels decreasing annually

Only if you were taking more than was realistic. However, reviews go for 3 years. Not yearly.

not to mention the 55% tax when I pass my money on to my kids!

Not sure of why you have an exclamation mark. the 55% equates more or less to the Govt taking back the tax relief that you got. It also avoids inheritance tax which is 40%. So, actually it is pretty good value.

Does anyone have any ideas on this?

You have posted one line with a bit of venting but given no detail. Why do you think the cost of buying an annuity is appalling. Most people find the annuity rate appalling at the moment. Not the cost of buying it. Drawdown rates have fallen but they dont fall annually unless you are doing something wrong. Are you already crystallised or waiting to crystallise?

atush

You can leave 100% of DD to the mother of your children if you married her ;-)

CannySaver_2

JRRHartley wrote: »

I have a pension with a fair amount invested. I am appalled at the cost of buying an annuity, drawdown are levels decreasing annually, not to mention the 55% tax when I pass my money on to my kids!

Does anyone have any ideas on this?

What are you wanting to achieve?

A larger income?

Annuity rates are clearly low at the moment and max GAD for Income Drawdown is low due to falling gilt yiedls, although it has risen for the past two months from memory.

What are you looking for instead, I would have thought that any income you take needs to be sustainable i.e. matched by fund growth, or are you happy to see your fund reduce un value over time?

The Canny Saver

atush

In any case, as a famous author on Fly Fishing, who stars in commercials, I would have thought you would have a very large pension pot indeed ;-)

thenudeone

JRRHartley wrote: »

not to mention the 55% tax when I pass my money on to my kids!

You get tax relief to enable you to provide for your own retirement, not as an inheritance mechanism.

If you want to give money to your kids, don't put it in a pension. Just take your income after tax and give it to your kids now. As long as you live for 7 years there will be no tax of any kind on the gift.

CannySaver_2

thenudeone wrote: »

If you want to give money to your kids, don't put it in a pension. Just take your income after tax and give it to your kids now. As long as you live for 7 years there will be no tax of any kind on the gift.

And if you give it out of income, which you can prove you don't need, it is IHT exempt immediately.

jamesd

JRRHartley wrote: »

I have a pension with a fair amount invested. I am appalled at the cost of buying an annuity, drawdown levels are decreasing annually, not to mention the 55% tax when I pass my money on to my kids!

55% applies after you've taken any benefits from the pension, it's 0% when passing money into the pension of a spouse.

You can start taking benefits when you're 55 using drawdown at the maximum permitted rate. Over time that will let you withdraw money from the pension and place it into non-pension investments. This is also the way to work around the GAD limit unless you want to retire at 55.

How long it takes to withdraw what you paid in and the growth on it depends in part on how much tax relief you got on the way in. If it was at 40% tax, 60% of the money in the pension is from you and 25% of that can be taken as a tax free lump sum, leaving 35% to extract.

Sophisticated and experienced investors might try using leveraged long or short investments within a SIPP and the same investment but in the opposite direction outside. If this goes wrong it would add money to the pension instead of removing it.

srcandas

jamesd wrote: »

Sophisticated and experienced investors might try using leveraged long or short investments within a SIPP and the same investment but in the opposite direction outside. If this goes wrong it would add money to the pension instead of removing it.

James that sounds fun but be blowed if I can see how it might work.

Let's ignore burdening yourself with increased external, and for that matter internal, (to the pension pot) expenses.

We need to put at risk external money in order to gain external money. If we fail the only compensation is that internally we have increased the pot!

If the investment (gamble) outside works it would work whether it was balanced within the pot or not. Or am I missing something (probably ).

Or is the theory that if the pot 'wins all' we in someway can sell the after death benefits of the pot?

Or is that illegal?

JRRHartley

Thanks for all your answers. I guess what I am really asking is; is there a way to get hold of my money and take it out of the restrictive pension scheme, and put it somewhere where I can invest more freely and pass down to my children without the 55% tax.

Sadly my wife of 59 years passed away last year, so there is no need for her provision. I just don't see why my children should lose out down the line.

I would really like to invest in residential property, where I believe there is good potential for growth, but I have been given the impression that this is not possible within a pension?

okydoky

jamesd wrote: »

55% applies after you've taken any benefits from the pension, it's 0% when passing money into the pension of a spouse.

You can start taking benefits when you're 55 using drawdown at the maximum permitted rate. Over time that will let you withdraw money from the pension and place it into non-pension investments. This is also the way to work around the GAD limit unless you want to retire at 55.

No wish to hijack this thread but can someone elaborate on the above paragraph? My confusion is around the wisdom of taking drawdown early enabling the transfer of funds to a more flexible non-pension environment. If you are retiring early, say 56 and your savings equal the value of your pension pot, are you actually best to go into drawdown right away, rather than live off savings for a few years before touching the pension pot?

Or not??