Withdrawing Pension - Advice Gratefully Received

sanctuary

My husband has a pension pot of approximately £155,000. He is 58 years old and for various reasons we would like to access as much of this money over the next couple of years as possible.

In an ideal world, we'd like to take 25% (tax-free) now - but then what are our options with the remainder? Would he then have to start an annuity with it? (That was what he was told when he called up our pension provider, the Prudential.) Is there any way we can access this money after April 2015 without having to be locked into an annuity?

The rules (and the new ones coming into effect in April 2015) are very confusing, so any advice would be very gratefully received.

Thank you!

atush

Yes, you can take the 25% tax free today.

As to the rest, Prudential might just not offer Drawdown (what you want). You DONT have to buy an annuity, but you might have to transfer to someone who does.

After next april you can draw down the rest as you like.

But beware. If you take it all you will pay a HUGE tax bill. And you do need it to live off of, so I can't see any reasons he'd need to take it all ASAP.

After all, if he is ill, he could choose an enhanced annuity or you are his wife (not partner) could inherit the whole lot tax free if he is in DD.

xylophone

The rules (and the new ones coming into effect in April 2015) are very confusing,

http://www.telegraph.co.uk/finance/personalfinance/pensions/10710606/Budget-2014-How-will-the-new-pensions-system-work.html might be worth a look.

As to the rest, Prudential might just not offer Drawdown (what you want).

http://www.pru.co.uk/pensions_annuities/our_annuities/income_drawdown/

PensionTech

It is possible that your provider might allow you to take the tax-free 25% now and wait until next April to withdraw the rest as a lump sum. This is because HMRC are proposing to change their rules on how long you can wait to take the rest of your benefits after taking your tax-free lump sum: http://www.hmrc.gov.uk/pensionschemes/pensionflexibility.htm

You will also be able to use the pension flexibility from April 2015 if you receive a tax-free lump sum after 27 March 2014 under either:

• the scheme that paid the lump sum
• another scheme to which you have transferred the funds in order to access drawdown

This would mean that you wouldn't have to purchase an annuity or go into drawdown - you could just take the lump sum and wait.

However, this change hasn't been passed into legislation yet, so it's up to Prudential whether they will allow you to take the 25% lump sum and then defer the rest until April 2015. Current legislation says that you can only defer the rest of your benefits for 6 months after taking the lump sum - which won't take you past the magic date of 6 April 2015.

One last thing that I would say is that if you do take your lump sum now, the legislation is likely to have changed before 6 months is up (looks like it should be in by mid to late July). So if you take your lump sum now but Prudential do say you can only defer for 6 months, rather than waiting until 6 April 2015, they may change their tune before you actually have to make the decision. However, if the legislation isn't updated as/when expected, then in 6 months you'd run the risk of either having to purchase an annuity or having to pay up to 55% tax on the amount of the lump sum you've already received.

Call Prudential and ask them - try to speak to someone who knows what they're talking about!