Pension Freedom

stoddy2k01

Thank you for your advice. May I ask. So am I right in thinking that when the offer comes through. I contact Aegon then tell them I will accept the plan at its current value. Then they will I assume send me a claim form then send me a cheque.

dunstonh

stoddy2k01 wrote: »

Thank you for your advice. May I ask. So am I right in thinking that when the offer comes through. I contact Aegon then tell them I will accept the plan at its current value. Then they will I assume send me a claim form then send me a cheque.

You get the value on the day the pension is closed. It will be subject to daily movements right up to that day. One assumes you have fund switched it into their deposit fund (or a near deposit) by now. If not, you should do.

You request the forms for full fund withdrawal. As no adviser is involved, they may want to go through a telephone based process to verify you are aware of the risks and costs you will likely face. They wont be specific as its not advice and the phone call will be around 10 minutes. They then send the payment, net of emergency tax to your bank account.

stoddy2k01

I guess I ask them to fund switch it when the fund value letter arrives whilst I call to accept the fund then would I or should I ring them tomorrow to switch the fund to their deposit account.

AnotherJoe

stoddy2k01 wrote: »

Thanks for that. Would you know if I have to use a fininacial advisor or not. Because I don't want to pay him £150 an hr for nothing.

It will hardly be for nothing if you foolishly pay thousands of pounds in tax for sake of waiting a few months and withdrawing in two sums split over tax years. Or even just asking here.

jamesd

Just be aware that after the 25% tax free lump sum, the remaining 75% is added to your taxable incomes in the years in which you take it. That could easily put you into the 40% tax band or even 45%. The remedy for this is to draw the 75% over several years so you don't get into the 40% band. Or for those without other taxable income or within allowances it can be done at 0% via the personal allowance.

It isn't usually essential to take all of the 75% at once and there are big tax savings to be made by taking it more slowly.

stoddy2k01

Thanks for that. I'm assuming that as I don't have any other income I'll be taxed at the rate of 25% and I would be able to claim back my personal allowance of I think it's £11000 am I right in that.

AnotherJoe

stoddy2k01 wrote: »

Thanks for that. I'm assuming that as I don't have any other income I'll be taxed at the rate of 25% and I would be able to claim back my personal allowance of I think it's £11000 am I right in that.

No you are pretty much wrong in all respects apart from the personal allowance.
25% of the total sum would be tax free, not a tax rate.
The rest would be taxed as per normal income so 20% then 40% then 45% depending how much it is.
If you have no income at all you could,p potentially withdraw it all tax free over 4 years and a day. Even if you need the money as a lump sum, a loan will likely be cheaper than paying 20% tax.
If you don't need the money as a lump sum and have no other income, then IMO you'd be barking to take it out in one go.

xylophone

You say that you have no income and receive no benefits.

You could opt to take only your PCLS plus your PA (£11,000?) in this tax year - this would be tax free - be aware that the pension provider will almost certainly deduct tax on an emergency basis, but this could be reclaimed- see

http://adviser.royallondon.com/pensions/technical-central/information-guidance/benefit-options/emergency-tax-and-lump-sum-withdrawals/

You could then draw down the remainder of the pension over the next three tax years making use of your PA so that you paid no tax at all.

If you take the pension as a lump sum, and assuming that £12,500 +£11,000 is tax free as above, you will be taxed at 20% on £26,500 and so will lose £5,300 in tax.

You will almost certainly be overtaxed initially - again, see link above.

dunstonh

I had someone earlier in the year who was a new client. He was moaning about needing financial advice and how much it cost and that he didnt think he needed it because he knew what he wanted to do. In the end we saved him over £10,000 through reduced taxation compared to what he wanted to do.

Sometimes advice will just be what you wanted in the first place and you may consider it a waste of money. Sometimes it will be for things you never even realised you can do and can save you far more money than the cost of advice.

DavidRReed

I have a substantial pension pot, previously with Halifax but, as I turned 75 recently, they tell me I must transfer this elsewhere.

I have had a free consultation with an IFA who is helpful, but will charge a 2.5% fee for facilitating the move. And an on-line search shows that all other providers do too, with most saying they only deal through IFAs and some asking for a 4% fee!

Is this my ONLY option?

I see this as simply as transferring a bank balance from A to B, why am I having to pay as much as £10,000 for the service?

David R.
London