New pension rules

jem16

Freecall wrote: »

You just happened to give the £40k example which works very nicely for the OP's four year time frame.

I don't think the OP gave a time frame, 4 years or otherwise - unless I missed it?

I just went for £40k as it was easy to work out 25% of it.

Freecall

jem16 wrote: »

I don't think the OP gave a time frame, 4 years or otherwise - unless I missed it?

Maybe just a question of interpretation. I read :

'From April I want to draw 25% each year'

as meaning 4 years to draw 100% but I recognise that it could be interpreted in other ways.

Maybe the OP can clarify.

Paul_Herring

Freecall wrote: »

Maybe just a question of interpretation. I read :

'From April I want to draw 25% each year'

as meaning 4 years to draw 100% but I recognise that it could be interpreted in other ways.

Maybe the OP can clarify.

Well yes... Presuming a starting fund of £100k:
Year 1: £25K leaving £75K
Year 2: £18.75K (25% of £75k) leaving £56K...

https://docs.google.com/spreadsheets/d/1-tvZbDaqjART5d9KuhjFmYAfpBrf5HyiJfsK1spuoJc/edit?usp=sharing

Of course it's all academic, since after the first year it's going to get taxed, regardless of what the OP thinks they've been told.

doesmyheadin

I have a pension fund of 47000 and want to draw 25% tax free and leave the rest for flexible drawdown over the following years. (I do not want to go into a higher tax bracket of 40% which may happen with all the other income I have). I asked my provider if this is possible and they replied that if I take 25% I would have to take the rest as an annuity.(That is true if I did this before Aprils changes).
They informed me that they have no department in their company to deal with the new changes but will have in April but this would mean that I would have to transfer my current funds and policy to this new department and become a new policy holder, I requested that they did this and was told that I would first have to receive advice from a financial advisor. Anyone heard of this?

Linton

doesmyheadin wrote: »

I have a pension fund of 47000 and want to draw 25% tax free and leave the rest for flexible drawdown over the following years. (I do not want to go into a higher tax bracket of 40% which may happen with all the other income I have). I asked my provider if this is possible and they replied that if I take 25% I would have to take the rest as an annuity.(That is true if I did this before Aprils changes).
They informed me that they have no department in their company to deal with the new changes but will have in April but this would mean that I would have to transfer my current funds and policy to this new department and become a new policy holder, I requested that they did this and was told that I would first have to receive advice from a financial advisor. Anyone heard of this?

You may have to transfer to another provider to avoid the Financial Advisor requirement. Any pension company can decide whether or not to support the new features, and under what conditions. Before you transfer you should check that there arent any guarantees that would be lost.

xylophone

If this is just a standard personal pension policy, there is no compulsion to take an annuity even under current rules?

Is it a S32 by any chance?

Otherwise, I do not understand why you should be required to consult an IFA?

Which insurer is it?

jamesd

There's a difference here between their rules and the law. You're being told about their rules, not the law.

The law is that you do not need to buy an annuity if you take a tax free lump sum now. HMRC specifically relaxed the timing requirements to allow people to take the lump sum and then act further after the changes on 6 April 2015.

I suggest that you transfer to another provider. Since they are saying that they require you to get paid financial advice now I assume that they will also require it again if you use the flexibility after 6 April. Cautions apply here if this is a section 32 policy with added protection of some sort or if there is a guaranteed annuity rate that is worth having.

If you will want to take any part of the remaining 75% and also pay more than £10,000 a year into a pension you should act urgently to enter "capped income drawdown" now. Using the flexi-access drawdown that''s available from 6 April 2015 you have your annual pension contribution allowance reduced from £40k to £10k if you take even a penny beyond the 25% tax free lump sum. Under capped income drawdown you can take out the GAD limit amount without triggering that restriction. Among other things this allows you to take and recycle the pension income into new pension contributions. New capped income drawdown schemes will not be available from 6 April but money can be added to existing ones.

Because money can be added, you can achieve a similar result with any personal pension pot, just get one into capped drawdown. If you do this, best not to take the 25% from the one in the current place first, because there is a restriction that prohibits combining crystallised pots and if you take the 25% it'll be a crystallised pot not combinable with this capped drawdown pot. Instead, move without taking the 25% then take the 25% and combine with the drawdown pot at that time.

dunstonh

They informed me that they have no department in their company to deal with the new changes but will have in April but this would mean that I would have to transfer my current funds and policy to this new department and become a new policy holder, I requested that they did this and was told that I would first have to receive advice from a financial advisor. Anyone heard of this?

You either have a provider that only retails their product through intermediaries or a pension type with guarantees where the provider does not want to take on the liability itself for you making a mistake.