MSE News: Budget 2014: Radical reforms to give greater access to pensions savings

mania112

Terry_spurs wrote: »

Would like some advice please.
My wife has just turned 60 and wants to carry on working till her state pension comes into effect when she reaches 65.
She has a works pension that is nearly £25,000 in total.
Would she be able to take that sum out,subject to tax obviously and carry on working.
Also this is the only pension pot she has because we keep hearing about people having up to 3 small pension pots or so.
Any replies gratefully received.
Thank you !

A new change from March 27th allows 60+ year olds to withdraw their pension - if their total pensions are less than £30k.

So yes she can.

If the company are paying in, you might think about leaving it as it is because that's free money being paid into the pension.

This process is known as Triviality. Under Triviality, further pension accumulation is not allowed.

atush

clivep wrote: »

Will there be any restrictions or tax implications for paying into a new pension plan whilst you are taking money out of a different plan under the new rules?

The new access to your pot looks like the current flexible drawdown without being conditional on having other income. With the existing flexible drawdown there are restrictions on contributions to other pension plans.

e.g. I am over 60 and have no taxable income.
I contribute £2880 into a stakeholder pension which the tax man tops up by £720 to make £3600.
The following year I cash in the scheme and start another.
The one I cash in gives me 25% tax free of £900. Under the new rules I'll be able to take the remaining £2700 subject to basic rate tax but as this is well under my £10,500 allowance then I'll not pay any tax on it. Total I'll get is £3600.

Repeat year after year. £2880 in £3600 out. They're no going allow this are they?

They will in that there will be 3 times you can do this currently under the small pots rules(not yearly every year forever perhaps)? Not 100% we will have to see the draft and final legislation. They may or may not.

If the rule stays at 3, you contribute to one pension over 2 years then encash it starting another for 2 years. 3 years can't go into one at present as this would be over 10K each. Maybe 2.5 years?

anyway, i think we have to see the final rules before we can say. So starting one this year and putting some in next would be a good idea while you wait?

atush

Terry_spurs wrote: »

Would like some advice please.
My wife has just turned 60 and wants to carry on working till her state pension comes into effect when she reaches 65.
She has a works pension that is nearly £25,000 in total.
Would she be able to take that sum out,subject to tax obviously and carry on working.
Also this is the only pension pot she has because we keep hearing about people having up to 3 small pension pots or so.
Any replies gratefully received.
Thank you !

If her work has a works pension id have her carry on pay in. But yes she could cah in some of her old policies but I'd wait taking more than the 25% TFLS as if she waited for the rest she might not pay so much tax on it? but if her income is slow she could take more but not so much as to put her into HRT.

atush

scubascuba3 wrote: »

I'm still excited about these pension changes.

I plan to:
Retire early and live abroad, somewhere far cheaper than UK.
At 55 take 25%
Then take enough drawdown to be under the lower tax limit. So the aim will be to pay no tax unless I can't subsidise by cash/investments alone in any year.

Above someone mention the pension crystallises. What do you mean by that?

My expectation is my pension fund would still be invested in investment funds in my SIPP which I reduce by the 25% and regular withdrawal. I'd still expect the pension funds to go up and down with the market.

Anyone think otherwise?

Where will you be retiring? You won't have a tax limit of you aren't tax resident?

goinkonit

My husband retires in June and we will have a adequate final salary pension. He also has 2 private pensions of £28,000 and £12,000. Would we be able to take the £28,000 as a tax free lump sum from Thursday 27th March,2014, or does it have to be added to the other £12,000 therefore taking us above the £30,000? Thank you.

poppysdad

Could someone please give me a bit of guidance

My wife has a couple of small old company pensions pensions but her current employer contributes does not make any contribution into a pension.

I am planning to retire at 63 and if she chooses to retire at the same time she would be 57. She has a couple of small works pensions that would not kick in until she gets to 60 and then at 67 she would be entitled to a full state pension in her own right.

If she contributes to a personal pension over the next 11 years she can take 25% as a tax free lump sum, but my question is

Can she then drawdown the reminder of the pension bucket over the remaining years before her other pensions kick in keeping below the lower tax threshold and thus avoid paying tax on any part of her pension ? or

Is there still a restriction that an individual has to still have. Certain minimum pension in their own right before they can drawdown from their pension ?

I have company pensions so as a couple we would be okay in respect to total income so I have no issues in relation to the longer term picture and my wife is covered under my company pensions if I should die before her.

clivep

atush wrote: »

They will in that there will be 3 times you can do this currently under the small pots rules(not yearly every year forever perhaps)? Not 100% we will have to see the draft and final legislation. They may or may not.

If the rule stays at 3, you contribute to one pension over 2 years then encash it starting another for 2 years. 3 years can't go into one at present as this would be over 10K each. Maybe 2.5 years?

anyway, i think we have to see the final rules before we can say. So starting one this year and putting some in next would be a good idea while you wait?

I wasn't thinking about the small pots arrangements but rather the drawdown conditions from April 2015. Taking your example for 3 years, the pot would be 10.8K + growth. Under the new rules from next year you could take it all as cash with no tax to pay if you have no other income (2.7K tax-free lump sum and the rest is less than your personal allowance).

Maybe I over-simplified my example. I do not have currently have any taxable income and have 60K in a stakeholder pension that I contribute 2,880 a year to with the taxman putting in 720 a year. At the moment I have a retirement age of 65 on the fund so income from it will get hit for basic rate tax when I start drawing my state pension. The new drawdown rules next year would allow me to take 15K tax free then 9K drawdown a year for 5 years thereby paying no tax at all on the complete withdrawal of the fund.

This seems like a no-brainer but my question is this: if I do this drawdown on my existing stakeholder pension can I take out a new stakeholder pension plan and pay 2,880 a year into it for the next 5 years and continue to get 720 a year added by the taxman? It would appear that this is the case with current income drawdown but not flexible drawdown. The new rules from April 2015 for access to your whole fund look more like the existing flexible drawdown without the requirement to have 12,000 of secured pension income from other sources (20,000 until March 27th) so does anyone know if the tax treatment of the new pension plan would be adversely affected?

jem16

poppysdad wrote: »

If she contributes to a personal pension over the next 11 years she can take 25% as a tax free lump sum, but my question is

Can she then drawdown the reminder of the pension bucket over the remaining years before her other pensions kick in keeping below the lower tax threshold and thus avoid paying tax on any part of her pension ?

Yes the new rules would allow her to do exactly that.

Linton

goinkonit wrote: »

My husband retires in June and we will have a adequate final salary pension. He also has 2 private pensions of £28,000 and £12,000. Would we be able to take the £28,000 as a tax free lump sum from Thursday 27th March,2014, or does it have to be added to the other £12,000 therefore taking us above the £30,000? Thank you.

The £30K limit applies to the total of ALL pensions so you wont be able to get them as cash until/if the 2015 reforms come in.

clivep

My question regarding the drawdown rules from April 2015 is relevant to SIPPS as well as stakeholder pensions.

Looking at income drawdown FAQ's on Hargreaves Lansdown site:

• Can I make additional contributions to my Vantage SIPP after income drawdown has commenced? Yes, you can make further contributions or transfer other pensions to your SIPP. New payments made after you have converted all the money in your SIPP to drawdown will have separate GAD limits and review dates if converted to income drawdown in the future.
  New pension contributions cannot be made after age 75.
  It is also not possible to make new contributions to any pension scheme once you have started flexible drawdown.

According to the HM Treasury Budget Report, the diagram for the future system only shows a single 'Drawdown/other products' option to replace the existing Capped Drawdown and Flexible Drawdown options. So will you or won't you be able to make new pension contributions after commencing drawdown post April 2015?