Release of 25% tax free money

mum_of_joey

I have a 'surprise' pension - less than £30,000 - (with Aviva), which was unknown to me until very recently. I have now had a session with PensionWise about my options, and am clear about the 'way to go'. However, I phoned Aviva several times during this period, and mentioned that whatever I opted to do with the money (I have decided on an enhanced annuity), I wanted to take the 25% tax-free money as soon as possible, as I have debts and other sudden pressing commitments which I don't want to leave until the annuity is finally set up (whoever I choose to do it through).

One of the Aviva people said that they thought that I could do that, the other person said that I couldn't do that, and would have to wait until the annuity had been set up, which would take 8 weeks (more if they had to contact my GP about my health details for the enhanced annuity).

Is there any real reason why, once they get the forms back from me, that they CAN'T release the 25% immediately? It implies that, if I HADN'T decided on my course of action with the annuity, that I would NEVER be allowed to have the 25% unless I signed up to an annuity (or whatever else I had decided) at the same time.

Suppose I had decided just to take the 25% for now and kept the rest in the pension pot until later (months or even years), to build the pension up (hopefully)? It says that I can take it out up until the age of 75 (I'm 67 now).

I thought that the 25% had no bearing on what I do with the rest of it, unless of course, they are waiting until the actual DAY that they actually put the figures from that day down to put into the annuity, as presumably the figures on my pension pot change from day to day? Do they not decide early on in the administrative process (ie within days) what figures they are working on? What do they do in that 8 weeks (or more) before the annuity is set up if they don't use the actual figures?

I didn't mention it to the PensionWise person, as I had been told that I COULD take this 25% out. Can anyone advise, please? I dread phoning Aviva again!

dunstonh

I wanted to take the 25% tax-free money as soon as possible, as I have debts and other sudden pressing commitments which I don't want to leave until the annuity is finally set up (whoever I choose to do it through).

That is not actually possible as a single transaction. What you are doing is two things.

1) immediately placing the pension into drawdown (chances are you on an Aviva pension that wont allow that)
2) later buying an annuity with the crystallised fund.

Is there any real reason why, once they get the forms back from me, that they CAN'T release the 25% immediately? It implies that, if I HADN'T decided on my course of action with the annuity, that I would NEVER be allowed to have the 25% unless I signed up to an annuity (or whatever else I had decided) at the same time.

As Aviva are unlikely to be able to do drawdown on a legacy plan (old version), they wont be able to issue forms for something they cant do.

Suppose I had decided just to take the 25% for now and kept the rest in the pension pot until later (months or even years), to build the pension up (hopefully)? It says that I can take it out up until the age of 75 (I'm 67 now).

You can go beyond 75 now. However, an old plan may still have restrictions based on old rules.

I thought that the 25% had no bearing on what I do with the rest of it, unless of course, they are waiting until the actual DAY that they actually put the figures from that day down to put into the annuity, as presumably the figures on my pension pot change from day to day? Do they not decide early on in the administrative process (ie within days) what figures they are working on? What do they do in that 8 weeks (or more) before the annuity is set up if they don't use the actual figures?

It does have a bearing as to take the 25%, you have to crystallise the whole pension. You either do this as part of the annuity purchase (using either open market option or Immediate vesting personal pension depending on which comes out best - often its the latter as not all annuities are available on OMO but need IVPPP).

Or you have to transfer to a pension that allows drawdown.

I didn't mention it to the PensionWise person, as I had been told that I COULD take this 25% out. Can anyone advise, please? I dread phoning Aviva again!

Pensionwise only talk about things generically. Not commercially. So, they will tell you that you can do what you want to do. They wont tell you what your existing plan can only do and that you need to transfer it or not or the actual process required or who to do it with. That falls within the remit of an IFA.

Aviva may not be much help as they will be limited to the rules of their product and if they dont offer a feature then they cant talk about it. They also cannot offer opinion or advice and with multiple ways to do what you want, they cant tell you what is best (and to be fair, call centre staff wouldnt be answering phones if they knew what was best).

edit added: Just to add some confusion, Aviva are saying on virtually all their plans that they support drawdown. However, this is a quirk from them. If a plan supports even just one of the non-secure options, they say the plan supports drawdown. Most of their legacy plans only support UFPLS (not a method you want to use). So, they say it supports drawdown. You have to be clear and ask it supports flexi-access drawdown (and expect to be told it doesnt as only their modern pension options support that).

mum_of_joey

dunstonh

Thank you so much for your very helpful reply. I can see what you are saying and you have explained why it is not possible. I thought that I was speaking to the people who 'knew' when I phoned Aviva as I was given a particular number to ring, but as I got two different answers from them, it was very frustrating, thinking that it depended on who I spoke to. The one who said that I can't take it didn't explain why, even when I said that the other person had said that I could. It was more a case of 'No, you can't', not a 'No, you can't, because....' !

Oh, well, I'd better get those forms in quickly then, and plan for a windfall in September!

Many thanks.

jamesd

Your original post described you planning to make several mistakes:

1. buying an annuity from Aviva when the pension pot is with Aviva instead of shopping around. Shopping around is particularly important with an enhanced annuity.
2. buying an enhanced annuity without having mentioned comparing your best enhanced rate to standard, state pension deferral or drawdown.
3. just taking the 25% and leaving the rest for later seems to best match what you want to do. To do this, you transfer to s product with Aviva or somewhere else that offers flexi-access drawdown, take the 25% and leave the rest in the flexi-access drawdown account until later. Later could be a week or 30 years later and you can take out any portion of it whenever you like. Or you could take all 100% now if that makes sense. You can use any portion of the 75% to buy an enhanced annuity later if you like, after shopping around for the best deal.

At the moment I have the impression that you're being railroaded into buying an annuity that you don't really need, as the only way that might have been offered to you to get the 25% that you're after.

Watch out when asking Aviva questions. They are allowed to mislead you by describing only what the product you currently have with them offers, instead of the full range of options. Its one way providers can get people to not follow the FCA's shopping around guidance. With a simple transfer you have total freedom to take the 25% quickly then take your time with shopping around. It's the sort of thing that Hargreaves Lansdown makes easy and they will even quickly provide you with a range of enhaced annuity quotes before you decide.

xylophone

just taking the 25% and leaving the rest for later seems to best match what you want to do.

The OP may be constrained by her circumstances - she is on means tested benefits.


https://forums.moneysavingexpert.com/discussion/5864041/release-of-25-tax-free-money

sleepless_saver

xylophone wrote: »

The OP may be constrained by her circumstances - she is on means tested benefits.


https://forums.moneysavingexpert.com/discussion/5864041/release-of-25-tax-free-money

Just to add to this, AgeUK have just issued a factsheet ( Factsheet 91, Pension freedoms and benefits) which the OP should have a look at, especially sections 6 and 7 which are highly relevant to her situation, and supplement the advice she has had on other threads.

mum_of_joey

Thank you, jamesd for your reply, and also the reply from Dunstonh, both of which have been helpful to me and have given me food for thought. Aviva has this afternoon emailed me with all the forms needed for them to give me quotes for various annuities. To be fair, they have also given me information on their comparison site - the PensionWise chap on Monday also gave me a link to the Money Advice Service comparison site, and I planned to do all this tomorrow.

I wondered if you know if by transferring out to someone like Hargreaves Lansdown for a flexi-drawdown product takes the length of time (at least 8 weeks) on Aviva's part that it would do if I went through the enhanced annuity process with Aviva (or another provider), please? Because of me needing to get this 25% tax free bit out, as you quite rightly say, I am feeling a bit 'railroaded' into making a quick decision on all this, and I feel that I want to take my time about the eventual destination of my pension pot.

Many thanks if you are able to help out.

mum_of_joey

sleepless saver. Thank you for the pension document that you have sent the link to. I have started to read this and it is proving to be very useful. I had written to the DWP 3 weeks ago, telling them about this previously 'unknown' pension of mine, but have not heard back yet but some of what I have read on this sheet has helped me to work out some of the repercussions of this 'windfall' on my benefits.

sleepless_saver

Glad it's useful. In your shoes I'd phone the Pension Service and check they have got your letter, and keep a record of the date of the call and who you spoke to. It will be much better for them to learn about the pension from you than from their own information (via HMRC).