Why the new Pension Rules are a Scam.

jamesd

monkey_shoulder wrote: »

I thought this was a good idea and looked forward to "drawing down" my pension, effectively taking early retirement.

It is, you could before the changes and you can now, with even more flexibility in amount of income taken.

monkey_shoulder wrote: »

When I asked my pension provider, ReAssure, how I could get at my money they stated, and I quote: " You will not be able to take your benefits flexibly from your current ReAssure pension unless you take the whole pot as a lump sum."

The legal changes allow providers to do things but they do not require them to do them. It seems common for places with older retirement products to update those just far enough to support the Uncrystalised Funds pension Lump Sum (UFPLS) option that allows drawing all or part of the pot as a 25% tax free and 75% taxed amount. Some may restrict that to only the whole pot, though nothing in law requires them to.

As well as the fixed tax free and taxable parts, taking the UFPLS option will cause your pension money purchase annual allowance to be reduced from £40,000 to £10,000.

If a provider does not offer the option desired in the existing product the alternative is to transfer to a product that does, usually their current product or the current product of other providers.

Once you have transferred you have all of the options that previously existed:

1. Up to 25% tax free lump sum from any portion of your pension pot that you want to crystallise.
2. The remainder taken as income using the new flexi-acces drawdown in any amount desired whenever you like. The previous GAD limit on how much you can take that applies to capped income drawdown that existed for new accounts until 5 April 2015 has been removed. Take any of the reminder and your money purchase annual allowance is cut to £10,000.
3. If you already have any money in capped income drawdown you can add the money to that if you take it at the place that your existing plan is at, and not have your MPAA cut unless you take more than the GAD limit.

The income you take from the 75% is normal taxable income. Until they receive a tax code from HMRC the pension provider will use the emergency tax code that will cause them to deduct too much tax. There are HMRC forms that can be used to reclaim the tax overpayment soon after the money is received. This mainly matters if taking lump sums because if regular monthly income is taken the new tax code will cause the overpaid tax to be repaid during the year, usually.

monkey_shoulder wrote: »

I thought that I could take, say, £10,000 a year out of it without tax, since my personal allowance is £10,600

You can, just need to move to a more modern product. Plenty of those around.

[Deleted User]

I, for one, am very grateful for the new pension rules. My husband died just 2 months ago and already his whole sipp has been transferred to my sipp, allowing me to continue flexi access drawdown. I vested our sipps years ago and have always done drawdown, even with my small pot, I managed his sipp too. I have now nominated my children to be benefactors and hence to continue taking a pension after my death if they choose to do so. :beer:

I couldn`t hep but put the smilie on, it really was a very good move for many of us

atush

Wouldnt it have been better to take his whole Sipp as a tax free sum?

johnbfan

A IFA on a local radio phone-in on the new rules stated that the real purpose of the pension changes is that the government will receive over £1 billion in tax into the coffers.

My husband is trying to get his occupational pension sorted through the fund administrators. He wants to do drawdown and two months from first contacting them to start the procedure to research what he can do and get it in place he is no further forward.

He doesn't want an annuity. They are paying out the lowest rate in years with no sign of it improving. He would get around £30 a week at the moment..

zagfles

atush wrote: »

Wouldnt it have been better to take his whole Sipp as a tax free sum?

Because it was already in drawdown by the sounds of it. Under the old rules the PP could only have got it tax free if he died under 75 and the pot wasn't crystallised.

dunstonh

My husband is trying to get his occupational pension sorted through the fund administrators. He wants to do drawdown and two months from first contacting them to start the procedure to research what he can do and get it in place he is no further forward.

its unlikely an occupational scheme would offer drawdown.

He doesn't want an annuity.

And there has been no requirement for many years.

atush

zagfles wrote: »

Because it was already in drawdown by the sounds of it. Under the old rules the PP could only have got it tax free if he died under 75 and the pot wasn't crystallised.

Sorry i didn't get it was started already

TH1878

monkey_shoulder wrote: »

You obviously don't understand the problem.

How ironic.

monkey_shoulder

kidmugsy wrote: »

"Yesterday, 10:54 PM" Perhaps the OP had "dined well" as they say in the House of Commons. Or was "tired and emotional" as Private Eye puts it.

Actually, Kidmugsy, I was stone cold sober, but what I was, was angry.

I am not impressed by all this name-calling and sneering that I am getting from this forum.

I had no idea that ReAssure were some kind of dodgy company that was trying to defraud me by not making my options clear.

They told me that there was no way to access my pension pot without converting it into something called a "Retirement Account" and that this would mean that 25% was tax free but the other 75% would be immediately taxed. They sent me a booklet, entitled "Your Pension: it's time to choose", which carries the logo of the Money Advice service, and Pension Wise.

On page 14 of that booklet it clearly states that if you wish to take "flexible income drawdown", that you may take the 25% tax free but must move the rest of your funds within 6 months or pay tax on the lump sum of 55%.

Also in that booklet, there is an option "Take small cash lump sums" (page 17.) ReAssure do not seem to offer this option, and this and other details made me assume that the booklet was not a ReAssure publication, but a general text that refers to all.

I have an appointment with a financial advisor tomorrow, and will report back when I am better informed.

MS

dunstonh

I had no idea that ReAssure were some kind of dodgy company that was trying to defraud me by not making my options clear.

They are not trying to defraud you. Their legacy contracts dont offer it but their modern contract does.

On page 14 of that booklet it clearly states that if you wish to take "flexible income drawdown", that you may take the 25% tax free but must move the rest of your funds within 6 months or pay tax on the lump sum of 55%.

What is the date of that document? it sounds like a pre 6th April version.

lso in that booklet, there is an option "Take small cash lump sums" (page 17.) ReAssure do not seem to offer this option, and this and other details made me assume that the booklet was not a ReAssure publication, but a general text that refers to all.

I've done trivial commutation with a Reassure plan before.