Converting a Defined Benefit scheme

sandsy

northernsoul wrote: »

A relative said why don't I see his FSA for advice. This FSA , i believe, represents the fund he suggests i put my DC pension into.

So the adviser is tied to the firm he recommends? Which means he's not independent. If you talk to any adviser, they should be independent. Only an independent adviser can search the market for the most appropriate option for you.

northernsoul

xylophone. Thanks for the links (should have looked myself Doh). Will look later. Now off for a pint!
Sandsy. Thanks for reply. Good point. I am not sure if he recommended the fund or represents the fund. I would probably say now he recommended the fund. He just seemed so familiar with the fund that i might have mistaken he represented the fund. All i can remember is the fund charge is 1.25% and he gets (i think i remember) 0.25% of this ie 0.25 for him, 1% to manage fund.
Thanks again for all the replies

kidmugsy

What's an "FSA"? You should either hire an IFA or just DIY.

northernsoul

Sorry, my new terminology, an FSA - Financial Services advisor. He was, i guess, a IFA.
Looking at those links, none of them mention personal allowance. All say something similar to this (taken from Scottish Widows)
' When it comes to taking your money out, you could arrange for a regular income, take it when you need it, or a combination of the two. There’s no limit to the amount of your pension pot you can take, but what you do draw will be subject to tax as you get your 25% tax-free allowance up front '
Not exactly clear saying 'what you do draw will be subject to tax'
They give the impression that once you have taken the 25% tax free lump sum you are then taxed on the rest no matter how much you take out.

northernsoul

From HL
You can usually take up to 25% of each amount you move as a tax-free lump sum, and keep the remainder invested, drawing taxable income directly from the pension.

hugheskevi

Looking at those links, none of them mention personal allowance.

You wouldn't expect them to - it is irrelevant.

Not exactly clear saying 'what you do draw will be subject to tax'

You can take a Pension Commencement Lump Sum - commonly referred to as tax-free lump sum - of up to 25% of the pot. The remaining 75% is taxable income when taken.

They give the impression that once you have taken the 25% tax free lump sum you are then taxed on the rest no matter how much you take out.

You are taxed on the remaining 75%, as it is taxable income. If your taxable income is within your personal allowance then no tax is due, if the amount of pension withdrawn is sufficient to take your taxable income into the 20% band of income tax you pay 20% on the amount of taxable income in the 20% band and so on.

There may be some reclaiming of tax from HMRC to do, as the payments will have tax applied to them when you withdraw, but that is straightforward (at least, as straightforward as dealing with HMRC ever is).

my new terminology, an FSA - Financial Services advisor. He was, i guess, a IFA.

I wouldn't be guessing in matters like this. This 7.5% withdrawal seems bizarre, and almost certainly inappropriate for your needs, although I think there are probably some misunderstandings here.

As kidmugsy mentioned above, a concern I've had reading this thread is assumptions about 8%/10% growth net of fees. Investments which can generate those sorts of return will have the potential to lose capital value. Given you need the money in a short period of time I would be concerned about their suitability - typically less volatile investments would be expected for money which is needed in a short period of time.

kidmugsy

northernsoul wrote: »

From HL
You can usually take up to 25% of each amount you move as a tax-free lump sum, and keep the remainder invested, drawing taxable income directly from the pension.

Yes of course it's taxable. But you are in the position that you can arrange that the tax rate is zero.

northernsoul

hugheskevi - thanks for taking the time to reply. Yes, looking further it does make it clearer about personal allowance. 7.5% is strange but I texted him today and he confirmed I can only take out more than 7.5% after 6 years.
Its looking like i may have to find something more appropriate for my needs - as you say. 8/10% is historically what the funds have achieved. I realise this may not continue.
kidmugsy - thanks again for your help at this late hour. I understand I am in a position to arrange the tax rate is zero, providing i can find a company to drawdown up to my personal allowance. I guess many companies provide this. Looks like one of these is Scottish Widows.