Management fees greater than return

MallyGirl

probably best to start a new thread.

dunstonh

1drakey1 wrote: »

I have just decided to cash in my pension with Pensionlite and they have refused to give it to me.Be warned.

Bit of a random statement for this thread.

It may be better for you to start a new thread. However, no pension provider will refuse to give you your pension as long as you are within the retirement age range and its a conventional personal pension. There may be a few hops to complete.

I suspect you are not in the retirement age range and didnt realise that pension meant pension.

Seabee42

Old Mutual use sales agents so are in the St James Place, Tru Potential Wealth category, i.e. they are getting richer not you. I suspect the charges are high.

dunstonh

Seabee42 wrote: »

Old Mutual use sales agents so are in the St James Place, Tru Potential Wealth category, i.e. they are getting richer not you. I suspect the charges are high.

Old Mutual make their product available via IFAs or its in-house network Intrinsic. (just to avoid confusion).

cfw1994

dunstonh wrote: »

<snip>

Also, you dont need to draw the 25% at the start. I find most of the ones I do take it phased.

<snip!>

Yet more excellent advice from dunstonh (thanks for all you contribute to these forums!)

This raised a question in my head - not to derail this thread too far, but as an example:
If someone reaches 55, decides to crystalise pensions and move to drawdown - say those total 800K at that point in time.
They can they get up to 200K with no tax to pay: that is clear

You say that can be phased (& perhaps often is)
So:
(for example) - they could take 100K at that point, leaving the rest invested in a drawdown account.

Imagine the next two years went well, and that pot then went back up to 800K (or whatever - even down to 400K!) - the 'retired' person could then (or at any time) still take the other 100K they were allowed tax free - the drawdown pot would track that, and from that point on any other withdrawals are subject to normal tax?

What if they took (again for example) a regular 2k pcm payment from the point they crystalised the pot into drawdown - would that be counted out of the tax-free 25% immediately, or is that tax-free 'allowance' a clearly defined sum identified in some separate way?

I'm curious - I could imagine taking the entire 25% in one lump, partly to pay off the last bits of mortgage, but perhaps partly to then invest elsewhere (ISAs, or even premium bonds to give an easily accessible 'cash' pot)...but maybe it would be left in the pot and taken in the phased manner you mention.

(hope this makes sense....maybe I should have done a different thread!)

dunstonh

You say that can be phased (& perhaps often is)
So:
(for example) - they could take 100K at that point, leaving the rest invested in a drawdown account.

So, on that example of an £800k fund. if you needed £100k lump sum at the start, you would crystallise £400k of pension to raise the 25% equalling £100k. The other £400k would be uncrystallised and available to take 25% of that value (whatever it grows to in future). So, you have two segments within your pension. Crystallised and uncrystallised. the uncrystallised segment can provide 25% whatever that part of the fund value becomes.

Imagine the next two years went well, and that pot then went back up to 800K (or whatever - even down to 400K!) - the 'retired' person could then (or at any time) still take the other 100K they were allowed tax free - the drawdown pot would track that, and from that point on any other withdrawals are subject to normal tax?

25% of whatever that revised figure becauses at the point of doing it. So, that £800k pension only had half of it crystallised to fund the £100k.

So, £400k uncrystallised. £400k crystallised minus £100k paid out = £300k. You can never draw a tax free lump sum from that crystallised payment again. However, if that £400k segment grew to £600k when you wanted the rest of it, then its 25% of £600k. If it fell to £300k then its 25% of £300k.

What if they took (again for example) a regular 2k pcm payment from the point they crystalised the pot into drawdown - would that be counted out of the tax-free 25% immediately, or is that tax-free 'allowance' a clearly defined sum identified in some separate way?

This is where you could fine tune based on your tax position and there are various ways of doing it.

Think of each monthly payment as a single ad-hoc lump sum. Except there are automatically 12 of them over the year. It doesnt matter if its regular annual, monthly, quarterly or manual ad-hoc. The tax position is the same.

So, if you draw £2k per month from the uncrystallised segment, then 25% of that is tax-free and 75% subject to tax (above personal allowance). £500 tax free £1500 taxable. (you are crystallising £2k a month and immediately drawing that crystallised segment)

if you draw the £2k per month from the cystallised segment then there is no 25% tax free because you already took it up front.

I'm curious - I could imagine taking the entire 25% in one lump, partly to pay off the last bits of mortgage, but perhaps partly to then invest elsewhere (ISAs, or even premium bonds to give an easily accessible 'cash' pot)...but maybe it would be left in the pot and taken in the phased manner you mention.

Maybe do the ISAs if you dont have a problem with inheritance tax. Not sure I would consider premium bonds as the pension is tax-free and outside of the estate whilst invested. Premium bonds would likely see lower returns and is within the estate. Speed is not an issue. For example, as an IFA, i could key in a withdrawal on a pension now and have it in the account of the person within an hour with the right provider (some may take a few days longer if they do not prefund or have a more manual process).


Here is an example of a case I have that uses phased. They had no requirement for any lump sums up front. So, the pension is uncrystallised. However, he draws £20k a year as a lump (it could be monthly but yearly was preference here). We crystallised £20k of the pension fund and draw it as a lump. £5000 as 25% TFC and £15000 taxable. Everything left in the pension is uncrystallised and will carry on growing. Doing it this way will probably mean he gets potentially several hundred pounds more out of the pension tax free than taking it up front. (there is expectation that the £20k will be higher in some years).

zagfles

cfw1994 wrote: »

Yet more excellent advice from dunstonh (thanks for all you contribute to these forums!)

This raised a question in my head - not to derail this thread too far, but as an example:
If someone reaches 55, decides to crystalise pensions and move to drawdown - say those total 800K at that point in time.
They can they get up to 200K with no tax to pay: that is clear

You say that can be phased (& perhaps often is)
So:
(for example) - they could take 100K at that point, leaving the rest invested in a drawdown account.

Imagine the next two years went well, and that pot then went back up to 800K (or whatever - even down to 400K!) - the 'retired' person could then (or at any time) still take the other 100K they were allowed tax free - the drawdown pot would track that, and from that point on any other withdrawals are subject to normal tax?

What if they took (again for example) a regular 2k pcm payment from the point they crystalised the pot into drawdown - would that be counted out of the tax-free 25% immediately, or is that tax-free 'allowance' a clearly defined sum identified in some separate way?

I'm curious - I could imagine taking the entire 25% in one lump, partly to pay off the last bits of mortgage, but perhaps partly to then invest elsewhere (ISAs, or even premium bonds to give an easily accessible 'cash' pot)...but maybe it would be left in the pot and taken in the phased manner you mention.

(hope this makes sense....maybe I should have done a different thread!)

With an pot of £800k the LTA (lifetime allowance) becomes a potential issue. If you crystallised half (£400k) to take a £100k lump sum, and the uncrystallised £400k grew to over £630k, you'd breach the LTA. So if you do phase you'd need to keep a close eye on this.

cfw1994

Thx for that detail, much clearer!
If one were close to the LTA, does one need to "crystallise" it to avoid the risk of the number going over the LTA?
Eg, if the number were at 1M to begin with....if one took 100K cash, then one has crystallised 400K...but if that remaining 600K grew (for example) to 1M itself....would the top almost 400K be subject to the 55% tax that it would had the original pot been 1.4M?

Cheers!

<edit to say - just as Zagfles added! posts that cross in the ether...>

zagfles

cfw1994 wrote: »

Thx for that detail, much clearer!
If one were close to the LTA, does one need to "crystallise" it to avoid the risk of the number going over the LTA?
Eg, if the number were at 1M to begin with....if one took 100K cash, then one has crystallised 400K...but if that remaining 600K grew (for example) to 1M itself....would the top almost 400K be subject to the 55% tax that it would had the original pot been 1.4M?

Cheers!

<edit to say - just as Zagfles added! posts that cross in the ether...>

Yes. If you're getting close to the LTA you really need to understand LTA issues well, even if you use an IFA! We've seen loads of examples here of IFAs forgetting about or not understanding the LTA, see here:

https://forums.moneysavingexpert.com/discussion/comment/74467927#Comment_74467927

Google LTA BCE to get loads of helpful articles explaining the LTA.