Two different types of Drawdown?

jamesd

coyrls, thanks, you're right, I've removed the errant t.

jamesd

peterg1965 wrote: »

I read a good article on UFPLS on "This is Money" today, with a different set of circumstances UFPLS would make real sense and better value for money than flexi..

Got a link? Other than the possibility of charging differences or simplicity no benefits of UFPLS vs flexi-access come to my mind at the moment.

peterg1965

jamesd wrote: »

Got a link? Other than the possibility of charging differences or simplicity no benefits of UFPLS vs flexi-access come to my mind at the moment.

Link here James

http://www.thisismoney.co.uk/money/pensionfree/article-3020427/Why-SHOULDN-T-lump-sum-pension-amid-revolution.html

Looking at implications on tax and also the ability to make the UFPLS pot last longer by taking the same amount out compared with Flexi drawdown.

bmm78

peterg1965 wrote: »

Link here James

http://www.thisismoney.co.uk/money/pensionfree/article-3020427/Why-SHOULDN-T-lump-sum-pension-amid-revolution.html

Looking at implications on tax and also the ability to make the UFPLS pot last longer by taking the same amount out compared with Flexi drawdown.

The writer of the article may not even realise it, but it is comparing phased withdrawal (via UFPLS) with full TFC+Income (via Drawdown).

It is not an example of the relative merits of UFPLS over drawdown, as it is possible to do exactly the same thing with Flexi-Access Drawdown that it is suggesting for UFPLS.

There are many other flaws in the article, but if it gets people thinking about phased retirement (which has been available for years but underutilised), it's probably done some overall good.

Care really needs to be taken when reading articles from that source.

jamesd

peterg1965 wrote: »

Looking at implications on tax and also the ability to make the UFPLS pot last longer by taking the same amount out compared with Flexi drawdown.

Thanks. It doesn't do that, it just cooks the books to make it look as though it does.

To do that cooking they take out the 25% tax free lump sum in the William case and assume it gets thrown away and has no future growth. For the Sarah case the 25% continues growing so she end up with the benefit of the growth of the 25% that has been taken from William.

They also ignore the tax saving William had on the £25,000 by spending it, while for Sarah they give her the credit of the tax saving with each individual payment. This is why Sarah ends up with a lower tax bill, it's just sleight of hand forgetting that William already had the tax saving up front.

It's just another take the money sooner and you'll have less money later story, dressed up as being about the new rules but not requiring them.

chucknorris

jamesd wrote: »

Depends how else you might invest it after using up your £3600 pension contribution allowance. Personally I'd be using VCT investing to get the 30% initial tax relief and tax free income of around 5%+ that is typically available from generalist VCTs.

I've looked at VCT's and decided that they are not for me, I'm not saying that they are poor investments, just that I don't like them. I don't particularly want to be too 'hands on' and I don't want to have to put my faith in a fund manager, so I tend to stick to passive tracker ETF's (because at higher investments the fees are quite cheap).

I'm sure you could respond with lots of success stories, and that's great for you, but I just don't warm to them. After looking at them, I decided that I would rather pass up the tax incentives, possibly daft, but there you go, that's just me. I would rather pass up the tax incentives and stick with investments that I am comfortable with.

jamesd

You should definitely stick with investments that you are comfortable with.

Still, it is worth noticing that say the Albion VCT, one of those in this set of linked VCT offers, makes only asset-backed investments, meaning that there is security taken for all money it lends and its practice is that that is to be a first charge on the asset, taking precedence over all others. Its portfolio of investments doesn't look anything close to high risk, with the top ones being:

Kew Green VCT (Stansted) Limited	6,855 15.6% Hotels
The Crown Hotel Harrogate Limited	3,074 7.0% Hotels
Chonais Holdings Limited		3,043 6.9% Renewable energy
The Stanwell Hotel Limited		2,403 5.5% Hotels
Radnor House School (Holdings) Limited	2,320 5.3% Education
Active Lives Care Limited		1,846 4.2% Healthcare
Taunton Hospital Limited		1,846 4.2% Healthcare
The Charnwood Pub Company Limited	1,493 3.4% Pubs
The Weybridge Club Limited		1,328 3.0% Health & fitness clubs
Kensington Health Clubs Limited		1,296 2.9% Health & fitness clubs

That top ten is 55.1% of the total. Some of these things, like hotels and care homes, are not permitted for new VCTs but are allowed in this one because it was started before the rules changed in 1997. More recently started VCTs also have a rule that no more than 15% can be in one business. The top one is the Holiday Inn Express hotel at Stanstead. Chonais is a hydro-electic power business. The private Radnor school received top Ofsted ratings in all categories, the first time a new school had done that, and seems to be popular.

Projected income for this VCT is around 7% a year, equivalent to 10% after allowing for the HMRC tax refund. Tax free. It also has a buyback policy of just 5% discount to NAV, so selling without a big loss should be possible. That compares very well with say most P2P lending.

There's a big range of things in the VCT world. The one I described isn't the best overall but it being a long-established secured lending business might be of interest and I put a fair chunk of my own money into it during 2014-15 tax year.

hyperhypo

Please could someone explain if in flexi dd say taking annual chunks from a dc pot that after 25% tax free all of remaining annual tranche is taxes at marginal and that notion of allowance simply doesn't apply incases of pension withdrawal.....my apologise if beuing very obtuse here but this flexi mechanism offers mea means of funding a modest early ret before a dc pension of 13k in todays terms kicks in aged 63..
I'm 55 now putting 1500 pcm into dc scheme ..have 85k so far and 5 more years to keep at it. Flexi. Dd seems way to go to bridge a gap as won't mind if its exhausted by aged 66 when state kicks in. Does this sound credible?

geoff2

Come back Annuities, all is forgiven.

hyperhypo

again apologies for the dreadful appearance of my last post ...i won't be using a phone to compose it again.

The gist of my question in flexi drawdown does the usual tax allowance apply to income from pensions ie in addition to taking 25% without paying tax.

Does the notion of a tax allowance apply in retirement ?