Pension Drawdown

Alex444

I have a local authority pension that has paid out since I was 50years old and I continued to work on up till redundancy last year at age 62 years. I built up another pension pot of just under £12K and with the budget changes I thought I could draw this down as it would only pay me £100 per annum at 65 years. The pension company have told me that I cannot do that as the Pension Plan does not currently offer the facility, I would have to transfer to a defined pension plan through a new work's pension plan, but as I plan to stop working it is stuck.

Has the consultation finished and results published to change the rules?

jamesd

You can transfer then take 25% of the money as a tax free lump sum. Then you can use the small pots rule to take out the rest as a lump sum using the small pots rule that allows withdrawing of a pot of up to £10,000 as a lump sum up to three times per lifetime. The 75% will be taxable income in the year in which you take it. You are not allowed to take just part of this under the small pots rule, it has to be all or none of the 75%.

Ask them whether they provide these capabilities. They don't have to. If they don't, transfer.

You don't need next year's rules because the increase from £2,000 to £10,000 for the small pots rule has already happened and that will do the job for you.

Alex444

Thanks jamesd, pensions totally baffle me, I told the company I worked for that I did not want/need a pension from them as I was adequately covered by my Local Government scheme.

They said I could take 25% out and would have to move the remainder to an annuity.

Does the transfer have to go to another company pension (new job) or a private pension?

jamesd

You can choose either. Probably best to use a private pension since there's no benefit to you in using the work scheme. Also, the rules for taking the small pot lump sum require you to take out all of the money in the pension you're taking it from and the work scheme may have more money in it, taking you over the £10,000 limit.

So no gain and a bit more trouble potential from using the work scheme.

Alex444 wrote: »

I told the company I worked for that I did not want/need a pension from them as I was adequately covered by my Local Government scheme. ... They said I could take 25% out and would have to move the remainder to an annuity.

It's worth asking a bit more about this. It's this pot from another employer that you want to take, right? Is it a defined benefit pension or a defined contribution pension? Did they say the magic word "annuity" or did they just say "income"? Does it have investments held in your personal name or a big pot shared by all employees? Is it a personal pension, group personal pension, trustee-based defined contribution scheme or something else?

I'm asking because I'm trying to confirm whether it is a defined benefit pension or not, then I'm trying to determine whether it is an "occupational pension". If it is an occupational pension there is a ban on taking a small pot lump sum for three years after transferring any funds out of the pension.

If it is occupational and is defined contribution then you'd need to ask whether you can take the 25% tax free lump sum then use the new £10,000 small pots rule if you want the money without either a three year wait after a transfer or waiting until next years new rules arrive, which may or may not let you do what you want.

My previous answer assumed that it was a personal pension, not a company pension. No three year rule for the personal type.

dunstonh

just because options are available does not mean that the providers have to offer all those options. Most pensions dont offer drawdown. That will continue to be the case next year as well. All you need to do is transfer the plan to one that does.

Alex444

The quote from Towers Watson states:- "You would need to transfer your benefits out of the scheme to a defined contribution arrangement where this is available"

It is a money purchase arrangement as registered under Chapter 2 of Part 4 of the Finance Act 2004.

The scheme is with BSKYB and is sitting at £11929.60.