Flexible draw-down: how does it work in practise?

zagfles

Acremead wrote: »

I am 68. I have a pension pot totalling about £83 000 with Aviva and Standard Life. I was planning to take 25% tax free lump sum and buy an annuity with the rest of it (Have just had quotes iro £4 000 pa on £63 344). However, it's just been pointed out to me that I'm eligible for flexible draw-down as I already have State and other pensions totalling £22 750 gross pa.

I only have a hazy notion of how draw-down works in practise. I'm assuming that one lodges the pot with a financial institution who then feed out to you annually a sum which keeps you within your current tax band until the pot runs dry and your cash is released from where it's trapped.

Aviva have told me they don't deal with draw-down. I've received a proposal from Liverpool Victoria as follows:

Protected Retirement Plan. I give them my pot of £63 344 (ie nett of the 25% lump sum).
They then give me annually in advance either
£15 647 pa over 4 years (totals £62 588) or
£10 888 pa over 6 years (totals £65 328) or
£ 8 599 pa over 8 years (totals £68 792)

My main question is: is the LV proposal a typical example of how flexible draw-down works or are there other ways of doing it that I should be considering?

Thanks in advance for any insights you can give.

Some background info: based on family history and the fact that I'm on blood pressure medication I'm guessing (barring accidents) that I may live to my mid 80s.

Once the money's come out of the pension pot I'd plan to keep it in savings. I don't understand most investment vehicles and am not prepared to put money where 'it could go up as well as down'.

I already have savings iro £160 000.

The LV offer looks quite expensive, for the 4-year deal they are taking £756 off you and no interest.

You could use a platform, eg HL, see link above, their charges are lower, and you can keep the entire fund in cash. The basic interest rate is low, but they offer fixed rates where you can put part of your money away for fixed periods and get a higher rate (a bit like a building society fixed rate bond).

Have a look at others as well, there are probably better deals out there, but you should easily be able to find something cheaper and more flexible than the LV offer.

Acremead

Hit a snag on this. Looking at the 'declaration' document LV sent me (tho still uncommitted to going with them), I see I have to declare how much pension I'm already receiving in the current tax year. As I only started taking one of my pensions a couple of months ago, in this financial year I shall only get £18 500 and thus fall short of the minimum required for flexible draw-down. I can't see much sense in this as I'm getting well over the minimum over any period of 12 months. However, them's the rules it would seem (The HL site says the same).

I'll be taking Mania122's advice and get an IFA involved. Thanks to all for your contributions.