Starting Crystallisation/Drawdown 30 October 2014 at 2:19PM edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning 19 replies 2.6K views

Gatser

I will wait until the pension changes take effect from April 2015, but is there a "best time" to take the Tax Free 25% and commence drawdown?


I was considering October because I believe that means your pension year will thereby run Oct-Sept and equally straddle 2 tax years, which may be useful for tax planning....


Any hints and tips appreciated, thanks

Gatser

....or alternatively....


If you have taken your TFA and started drawdown, when did you commence and why then?


Is the date of commencement important?


Thanks

Your_Hero

Probably best to crystallise when your income from other sources (e.g. employment income) have stopped to maximise tax efficiency. But then again it depends on your personal circumstances and the amount of pension you have because it may be better to pay some at basic rate instead of higher rate tax.

kidmugsy

You can de-couple the age of taking the 25% from the age of drawing down the taxable income. For example, you could take the 25% in April and set your first drawdown for October, or whenever. Or set it at 0% on any-old-date to begin with.

Why not have a look at the websites of some of the providers, e.g.Hargreaves Lansdown or Cavendish Online, to see what they have to say?

Update: as for the TFLS, there may be a case for "seize the day". There's a handy window before the election in May.

Linton

I am in the process of setting up Flexible Drawdown. I will take the 25% immediately but not drawdown any taxed money until nearer the end of the tax year so I can more accurately assess the maximum withdrawal before going into HRT. The reason for doing it now rather than waiting until April is to maximise the amount I can get into ISAs. Also, I fear the SIPP companies will have major problems when many more people start drawing down next April under new rules.

So for me the drawdown year will make no difference.

Gatser

Linton wrote: »

I am in the process of setting up Flexible Drawdown. I will take the 25% immediately but not drawdown any taxed money until nearer the end of the tax year so I can more accurately assess the maximum withdrawal before going into HRT. The reason for doing it now rather than waiting until April is to maximise the amount I can get into ISAs. Also, I fear the SIPP companies will have major problems when many more people start drawing down next April under new rules.

So for me the drawdown year will make no difference.

Thank you for your feedback
I suppose with greater pensions flexibility, the dates (ie my age) is not relevant now as we can drawdown as much as we want with no GAD calculation (based on age) etc

Good point about leaving to near tax year end... as I work part time, I do need to avoid falling into HRT.

Also, I am thinking it would be better to take the TFLS sooner rather than later and use to top up ISA's and then invest balance in wifes name to utilise her (unused) Tax Free allowance.
Especially as taxable bonds seem to pay better rates than those available within ISA's or SIPP's.

Unless anyone thinks otherwise? ................:D

kidmugsy

Gatser wrote: »

Also, I am thinking it would be better to take the TFLS sooner rather than later and use to top up ISA's and then invest balance in wifes name to utilise her (unused) Tax Free allowance.
Especially as taxable bonds seem to pay better rates than those available within ISA's or SIPP's.

(i) Your wife might be a suitable case for pension contributions.

(ii) "taxable bonds": even better, interest-bearing current accounts. (And, depending on your wife's age, the new ns&i codgerbonds due in January).

jamesd

Gatser wrote: »

I will wait until the pension changes take effect from April 2015

Why? If you put even £1 into capped drawdown before April 2015 you are allowed to draw out the 25% tax free lump sum plus the GAD limit from all pots current and future before you trigger the drop in annual contribution allowance from £40,000 to £10,000. Makes no difference if you'll never work again but otherwise it's a useful tweak.

Gatser wrote: »

I was considering October because I believe that means your pension year will thereby run Oct-Sept and equally straddle 2 tax years, which may be useful for tax planning....

That seems reasonable to me.

kidmugsy

jamesd wrote: »

Why? If you put even £1 into capped drawdown before April 2015 you are allowed to draw out the 25% tax free lump sum plus the GAD limit from all pots current and future before you trigger the drop in annual contribution allowance from £40,000 to £10,000. Makes no difference if you'll never work again but otherwise it's a useful tweak.

You'd have to pay for the GAD calculation, but if the pot is large enough that might seem a small price to pay for getting access to, for instance, another year's worth of NISA subscriptions and pension contributions for sheltering the capital or income in.

Gatser

kidmugsy wrote: »

(i) Your wife might be a suitable case for pension contributions.

(ii) "taxable bonds": even better, interest-bearing current accounts. (And, depending on your wife's age, the new ns&i codgerbonds due in January).

Thank you
I agree I need to consider pension contributions for my wife.
I assume she should then withdraw that money before her state pension kicks in and uses up her tax allowance...?


Fortunately..... my wife has plenty of years yet before qualifying for the NS&I codgerbonds! ....but thanks anyway.

Gatser

jamesd wrote: »

Why? If you put even £1 into capped drawdown before April 2015 you are allowed to draw out the 25% tax free lump sum plus the GAD limit from all pots current and future before you trigger the drop in annual contribution allowance from £40,000 to £10,000. Makes no difference if you'll never work again but otherwise it's a useful tweak.

To be clear....
If I just take the 25% TFA, does it make any difference whether I do this pre or post April 2015?