What does the Chancellors pension revolution mean for us?

gallygirl

Like the rest of the budget, it benefits the rich who will have the larger pension pots.

I disagree - it's precisely because I'm not rich that it will benefit me. Flexible drawdown was not an option for me as I won't have 20k in pension income (2k more like!).

Although paying a lot into a SIPP and also getting a non-cont pension contribution from my employer I saw them both as a problem to be solved further down the line rather than the assets they actually were/are. Would I be brave enough to go for drawdown and risk a falling market which could 1/2 my income? Would I 'settle' for an annuity - or would that be a sensible choice etc?

Now I can access it all when I choose which gives me so many more options. (Insert image of Gollum sitting stroking his 'precious' crossed with Blofeld and cat and you'll know how I feel about my pot now compared to a few days ago .) It's mine, all mine......

At least with the capital one would be able to buy a house or houses to let out (possibly to family members).

I would advise never to let to family members - it's potentially fraught with legal and insurance issues, and possibly benefit issues for them. But I won't advise that in case I'm told I'm sticking my nose in etc. .

Lighten up folks - the new changes give greater flexibility, albeit with risks. Let's concentrate on exploring the options rather than mud slinging.

Paperweight

1) I am 56 and have semi retired but have not yet started my pension (thank goodness). I have a pension fund of about £300k. Once the changes have taken place I intend to take my 25% tax free and then drawdown the full amount that will not be taxed each year (£10k this year). What happens to the rest of the pension money? Does it remain in the original pension fund, growing or shrinking as that fund grows and shrinks?
2) My wife works (she is 8 years younger than me) and has a smaller pension fund. When I take my tax free lump sum (or my £10k/year drawdown) will I be able to give her this money so she can put it into her pension fund and get tax relief at her marginal rate? When she retires she will also then only drawdown enough to avoid paying any tax. This way it would seem that I effectively transfer money from my pension pot to hers allowing us both to drawdown our tax free allowance each year (once she retires), but with the added advantage that the government will give her tax relief on the extra contributions that she makes.
P.S. We have other savings, investments and capital outside the pension pots.

lbh2011

HI, I have been reading all of this with interest but unfortunately it all turns into French!

Could someone help me in plain English? I am a civil servant, partially retired and took a lump sum. I now get a small pension each month but am still working on reduced hours. Does any of these changes affect me?

sandsy

lbh2011 wrote: »

HI, I have been reading all of this with interest but unfortunately it all turns into French!

Could someone help me in plain English? I am a civil servant, partially retired and took a lump sum. I now get a small pension each month but am still working on reduced hours. Does any of these changes affect me?

Your existing pension is unaffected.
Are you still contributing to any pensions schemes?

lbh2011

Thanks Sandsy, yes I still pay into the work pension scheme, unfortunately I still have another 7 years before I can retire completely

OldBeanz

Paperweight wrote: »

1) I am 56 and have semi retired but have not yet started my pension (thank goodness). I have a pension fund of about £300k. Once the changes have taken place I intend to take my 25% tax free and then drawdown the full amount that will not be taxed each year (£10k this year). What happens to the rest of the pension money? Does it remain in the original pension fund, growing or shrinking as that fund grows and shrinks?
2) My wife works (she is 8 years younger than me) and has a smaller pension fund. When I take my tax free lump sum (or my £10k/year drawdown) will I be able to give her this money so she can put it into her pension fund and get tax relief at her marginal rate? When she retires she will also then only drawdown enough to avoid paying any tax. This way it would seem that I effectively transfer money from my pension pot to hers allowing us both to drawdown our tax free allowance each year (once she retires), but with the added advantage that the government will give her tax relief on the extra contributions that she makes.
P.S. We have other savings, investments and capital outside the pension pots.

1. The remaining money will still eb invested so will grow or shrink with the investments made.
2. Yes this is exactly how it works. I am in a similar position and have already paid into my wife's newly opened pension. Get some in this tax year:)

SallyG

Just thinking about how HMRC - and its new real-time system - will deal with all these variations on a theme/ different tax codes.

robin61

Hi,

I'd really appreciate some advice here.

My wife has 2 private pension schemes currently one is with Phoenix with a transfer value of 130K and one with the Co-op with a transfer value of £10K.

She doesn't work and therefore has no income. Is aged 52 and I doubt whether she will return to work. We've not been paying into her pensions for a number of years since she stopped working to look after our family.

Phoenix tell me theydon't allow drawdown on here scheme.

So as far as I can see she either takes an annuity or takes the new option of taking the whole lot out in cash. To be honest with the crappy deal you get with an annuity I am thinking the cash option might not be a bad one. At least her pension pot would form part of her estate and if invested wisely might well perform as well or better than an annuity.

As far as I can tell she will be able to get a tax free lump sum of £35K but will then pay tax on the £105K balance and I think that counts as income so that will mean a further circa 10K tax free to use up her personal allowance 10K to circa 42K at 20% and the rest she would be paying 40% tax on so in round terms she will lose around £30K of her £140K pot to the taxman.

Have I got this right ?

I am wondering also whether it would be worthwhile consolidation her 2 pension schemes with another provider who will allow drawdown. If this facility was available to her then presumably she would have the option of taking the 25% lump sum out and then gradually drawing on the rest to avoid tax. Is this right ?

I think we can probably afford to take some reasonable risks with her pension as I am in a decent final salary scheme and am building up a pretty healthy AVC to enhance my lump sum.

paul5046

Paperweight wrote: »

1) I am 56 and have semi retired but have not yet started my pension (thank goodness). I have a pension fund of about £300k. Once the changes have taken place I intend to take my 25% tax free and then drawdown the full amount that will not be taxed each year (£10k this year). What happens to the rest of the pension money? Does it remain in the original pension fund, growing or shrinking as that fund grows and shrinks?
2) My wife works (she is 8 years younger than me) and has a smaller pension fund. When I take my tax free lump sum (or my £10k/year drawdown) will I be able to give her this money so she can put it into her pension fund and get tax relief at her marginal rate? When she retires she will also then only drawdown enough to avoid paying any tax. This way it would seem that I effectively transfer money from my pension pot to hers allowing us both to drawdown our tax free allowance each year (once she retires), but with the added advantage that the government will give her tax relief on the extra contributions that she makes.
P.S. We have other savings, investments and capital outside the pension pots.

Interesting.

I would assume it carries on growing (hopefully) as it did before.
You say you are semi-retired and want to take the 25% lump sum, that is 75k. You also say you want to withdraw from your pot tax free. Soon the tax free allowance will be 10k, meaning 10k minus your salary and interest from anything else, is all you can take tax free. It might not be much.

paul5046

OldBeanz wrote: »

2. Yes this is exactly how it works. I am in a similar position and have already paid into my wife's newly opened pension. Get some in this tax year:)

And she got tax relief?
I thought "gifts" were not classed as income for tax purposes,so how can you get tax relief?