Pension advice , fixed term , GMA , Maturing Soon

graann

I have a five year Pension Plan, guaranteed maturity value with that matures at the end October this year.2014

In the info I received from them , they quote , Under the current rules your maturity value must usually be reinvested in another retirement income product with a provider of your choice.

It is my intention to use this money for something useful , house maintenance , instead of buying an annuity, which will pay me a pittance.

How do I invest / hold onto this money until the new pension rules come into force in April 2015 where I will withdraw the lot and put it to something useful ?

I don't really want to be investing in something that will be putting in a early leave clause etc.

I am under no illusion that I won't get stitched up for tax when I do withdraw all the money .

I understand that I can get 25% of this tax free and the remainder will be taxed at my normal tax rate of 20 %.

Is this correct ?

Any advice would be appreciated.

Your_Hero

graann wrote: »

I have a five year Pension Plan, guaranteed maturity value with that matures at the end October this year.2014

In the info I received from them , they quote , Under the current rules your maturity value must usually be reinvested in another retirement income product with a provider of your choice.

It is my intention to use this money for something useful , house maintenance , instead of buying an annuity, which will pay me a pittance.

How do I invest / hold onto this money until the new pension rules come into force in April 2015 where I will withdraw the lot and put it to something useful ?

I don't really want to be investing in something that will be putting in a early leave clause etc.

I am under no illusion that I won't get stitched up for tax when I do withdraw all the money .

Simply reinvest it with the current provider into a PP or Stakeholder or use another provider. What you need is a cash fund to prevent any fluctuations in value. Wait until April 2015 and withdraw it out. However, whether or not the provider you choose will allow full withdrawal is another question. You will have to wait and see as no one knows yet.

I understand that I can get 25% of this tax free and the remainder will be taxed at my normal tax rate of 20 %.

Is this correct ?

Any advice would be appreciated.

That's correct. The remaining 75% is treated as income for the year, so if it pushes you into higher rate, you may have to pay an additional 20% on the excess (making it 40% in total).

jamesd

"another retirement income product"? Not just "another retirement product"? Current rules since HMRC relaxed some constraints allow people to take a 25% tax free lump sum now then wait until the planned removal of capital restrictions on 6 April 2015 to take the rest as a lump sum as well. Not all pension provider systems will be able to handle, this, though, and if one cannot the remedy is to transfer the money to a different pension product, either with the same provider or a new one.

If the total value is up to £10,000 under current rules you can already take it all as a small pot provided you are 60 or older. The usual 25% untaxed, 75% taxed split for this.

graann

Your_Hero wrote: »

Simply reinvest it with the current provider into a PP or Stakeholder or use another provider. What you need is a cash fund to prevent any fluctuations in value./QUOTE]



A stakeholder pensions aim to provide a low-cost, transparent and flexible way for people on low incomes to make additional provisions for their retirement. Money invested in stakeholder pensions is invested in the stock market. On retirement a quarter of the accumulated capital can be taken as a tax-free cash sum, and the rest must be used to buy an annuity.

If a stakeholder pension fund is invested in the stock market , how can you have a cash fund to prevent fluctations in value , surely thats the opposite ?
I am another human who knows nothing about pensions.

Your_Hero

graann wrote: »

A stakeholder pensions aim to provide a low-cost, transparent and flexible way for people on low incomes to make additional provisions for their retirement. Money invested in stakeholder pensions is invested in the stock market. On retirement a quarter of the accumulated capital can be taken as a tax-free cash sum, and the rest must be used to buy an annuity.

If a stakeholder pension fund is invested in the stock market , how can you have a cash fund to prevent fluctations in value , surely thats the opposite ?
I am another human who knows nothing about pensions.

Pensions don't just invest in the stock market. There are other things to invest in, such as cash/money market funds, albeit at virtually 0% interest but that's not the point of holding cash, i.e. your aim is for it not to lose value now due to imminent retirement

graann

Having just read my report from my IFA from 2009 , I was paid a PCLS of 25%.
This was after the maturity of a Scottish Widows Personal Pension.
The remainder of the money was invested with Metlife for 5 years with a GMA.

Am I now able to receive a lump sum on the Metlife Maturity value ?

If so will this lump sum be taxable or not even possible ?

bmm78

A Fixed Term Annuity is a Drawdown plan, and the Guaranteed Maturity Value is a sum of (crystallised) drawdown funds.

It is essentially the same as if you were in an existing drawdown plan having taken tax free cash. The tax free cash is gone, and everything payable from the plan will be taxable, regardless of whether taken as a lump sum or as income.

Prior to the budget the options would have been:

a) Buy an annuity
b) Buy another Fixed Term Annuity
c) Transfer the funds into another drawdown provider

Following April 2015, it will be possible to withdraw the full sum (taxed as income).

I'm not sure what (if any) transitional arrangements Metlife have in place for maturing plans where the plan holder wants to wait until April. If you want to take as a lump sum you may need to transfer it to a drawdown plan (or buy a 1 year Fixed Term Annuity).

I would recommend speaking to your IFA, as they will be able to work out what your options are, and what the likely costs of each will be.

Your_Hero

graann wrote: »

Having just read my report from my IFA from 2009 , I was paid a PCLS of 25%.
This was after the maturity of a Scottish Widows Personal Pension.
The remainder of the money was invested with Metlife for 5 years with a GMA.

Am I now able to receive a lump sum on the Metlife Maturity value ?

If so will this lump sum be taxable or not even possible ?

You have already drawn your tax-free lump sum of 25%. The amount you invested with Metlife is a crystallised fund so the proceeds you take from it will be treated as income and taxed at your marginal income tax rate regardless of how you take it (e.g. drawdown or annuity).

bmm78

Further to last post, assuming it is the Freedom Income Plan, if on maturity there are no instructions, it seems that the funds will be placed in a cash account (with no interest or charges).

The Freedom Income Plan was taken off the market in 2012, so it seems unlikely that they will have any other options other than to move into another drawdown plan, buy an annuity, or just leave it there attracting no interest.

It is important though to speak to Metlife and/or your IFA to establish your specific options.

graann

Policy is Alico Living Time , taken over by Metlife.

Emailed IFA , waiting for reply.

Will ring Metlife this week for advice.

I am concerned about what will happen if I have no transfer arrangements in place before my Fixed Term matures .

graann

I rang Metlfe today and was advised I could keep my investment with them until the new tax year where it would get no interest or depreciation.
I asked about withdrawing the money in the new tax year.
I was thinking about withdrawing over a few tax years to avoid paying the higher tax rate ( along with my wages ) but was told this probably will not be possible with my money and would more than likely be given to me as a lump sum subject to tax.
Can anyone advise me , do I pay 20% tax up to £31,865 and 40 % on the remainder in the same tax year ?