Drawdown considerations

okydoky

Have established Sippdeal, putting in £20k for this tax year, and just about to transfer over other pensions totalling about £240K with a view to taking 25% tax free on 57th birthday(June) and starting drawdown to give around £9440pa tax free. I am retiring and will have no other earned income.

However -

1. Find that my Standard Life contract will cost me around £7k out of valuation of £54k as MVR, so will probably leave this until age 65 to avoid penalty?

2. Aegon say my transfer value is about £10K more that their valuation of £76K as part of it in With Profit fund with guarantees, so thinking I might be better to leave this be as well, or do I take it on the basis that if I wait, the enhanced transfer value may decline?

Other transfers from Zurich,Legal and General, and Fidelity are more straightforward.

I have investment portfolio of around £200K which I can use to live on, but understand perceived wisdom is to get tax free cash/income from pension.

Any thoughts?

kidmugsy

okydoky wrote: »

1. Find that my Standard Life contract will cost me around £7k out of valuation of £54k as MVR, so will probably leave this until age 65 to avoid penalty?

2. Aegon say my transfer value is about £10K more that their valuation of £76K as part of it in With Profit fund with guarantees, so thinking I might be better to leave this be as well, or do I take it on the basis that if I wait, the enhanced transfer value may decline?

I have investment portfolio of around £200K which I can use to live on, but understand perceived wisdom is to get tax free cash/income from pension.

How much of your £200k is in tax shelters i.e. Cash ISAs and Stocks and Shares ISAs? Your mention of £9440 p.a. implies that all of it is in tax shelters. Is it?

Anyway, I see no wisdom in closing your other tax shelters (i.e. pensions) if you don't need to. Therefore dealing with Standard Life later seems pretty sensible: that way you should get a bigger tax-free lump sum when the time comes, as well as a bigger annuity or drawdown.

Perhaps transferring the Aegon pot now to freeze the extra £10k in place would be wise. Next you have to decide how much of the pot at Sippdeal you want to crystallise.

You presumably want the drawdown income from Sippdeal, plus any non-tax-sheltered income from your other capital, to use up your personal allowance for income tax. If so, why not live off that plus as much of your non-tax-sheltered capital as you want to spend. As personal allowance is increased (the promise is only £10000 p.a. by 2015, though) you could always crystallise a bit more.

okydoky

Yes, most of my non-pension savings and investments in ISA's, mainly in S and S ISA's.

I do however have some shares currently outside any wrappers, around £30k, so would dividends count towards my personal allowance when I come to calculate my pension drawdown? I thought they were taxed at source anyway and that I am unable to claim tax back even if my total income less than personal allowance?

kidmugsy

okydoky wrote: »

Yes, most of my non-pension savings and investments in ISA's, mainly in S and S ISA's.

I do however have some shares currently outside any wrappers, around £30k, so would dividends count towards my personal allowance when I come to calculate my pension drawdown? I thought they were taxed at source anyway and that I am unable to claim tax back even if my total income less than personal allowance?

Good point.