Advice on the 25% drawdown option ... please

annandalex

Hi

sorry if this has been asked before but there's just far too much here for a newbie to look through. I'll be 50 (aaargh!) later this year and have a personal pension with Legal and General that has a fund of around 13,000. Is everyone entitled to drawdown 50% of their pension fund under new pension rules?

My original financial adviser has long since left the company (not that I would have trusted him anyway) and I've tried several times to make sense of the paperwork but it's just not clear to me.

I just want to know if it's worth contacting them to say I want my money - I need it! Thanks. Ann.

annandalex

Sorry - I meant 25% ! You can tell I'm confused.

EdInvestor

Yes, you can take the 25% out, but you will have to move it to a SIPP and put the other 75% into income drawdown first. You can then either leave it invested to grow, without taking an income, or take an income from it at 120% of the annuity rate.

Try https://www.h-l.co.uk for the SIPP, they have low costs and a good choice of funds for the remaining money.

dunstonh

I assume you mean income drawdown with 25% taken as pension commencement lump sum and nil income.

Yes, this option is currently available from age 50. Legal & General dont offer it on a number of their pensions though so it will require a transfer to another provider that does or an internal transfer to an L&G contract that does. This option is available with many personal pensions and SIPPs.

It is considered a high risk transaction still (from an advice point of view) and I doubt an L&G adviser would have the authorisation to do it anyway as most tied agents cant do the complicated stuff. There are pros and cons to consider.

EdInvestor

Amazing how po-faced some people can be over a fund of 13k. :rolleyes:

dunstonh

Doing drawdown could be beneficial in the short term but costly in the long term. Just because someone has only 13k doesnt mean they deserve to be treated any less than someone with a lot more.

annandalex

Thanks for your replies, obviously I will have to look into it further. If I can get to the money I really need to do so - I need it to buy myself out of a failed relationship and don't like the idea of taking on a large mortgage at my age. I was hoping to reduce my working hours in a couple of years!

Another concern of mine is that older members of my family, women living alone, who have small private pensions have actually ended up worse off than their neighbours, for example, as they are just over the limit of being able to claim pension credit and all the other benefits that stem from that.

My private pension will never be huge as I can't afford to pay any more into it so what's the point really? Ann.

dunstonh

If this is your only pension, then by taking drawdown you will not be able to take trivial commutation which will mean an income will be taken into account for benefits later on. With trivial commutation, no pension income would exist so you would get increased benefits later on. However, you cannot do that until age 60 at the earliest.

So, you need to weigh up whether its better to take it now or better to take it later.

Lucan54

I too need help regarding taking a pension. I understand that you are able, if there is only a small fund involved, to take all of the money, albeit having to pay tax on 75%. My pension provider (Nat West) informs me that this is only the case if you are over 60. Is this correct? Also can someone explain "drawdown" please.
I would like to maximise the amount I can access so any advice would be very much appreciated. Thanks.

annandalex

.... more than anyone probably wants to but ... stupid question probably - is drawdown the same as taking 25% as a lump sum at 50 and leaving the rest to do whatever it is they (Legal & General) do with it? Thanks to all of you for your imput so far.

dunstonh

Yes. It is income drawdown but setting the income level at zero.