Flexible draw down

tiptoes27

Hello
I know very little about pensions. I have only ever worked part time and will get a state pension of about £145 when I am 66. I am currently 59. I have a small pension from an old job - total pot of £65000. I have had a letter from them asking me what I want to do with it and I called them up. They went through the options
25% tax free and small annuity each year
No lump sum and slightly bigger annuity
Or flexible draw down account.
I currently earn about £3500 and have an income of £4000 from a rental property.
I was thinking of taking the 25% tax free now and then using the rest of the pot to withdraw an amount each year which would keep me within my personal tax allowance each year. I am thinking that I can then access most of the pot tax free. Does this make sense or am I missing something obvious?

Dazed_and_confused

I was thinking of taking the 25% tax free now and then using the rest of the pot to withdraw an amount each year which would keep me within my personal tax allowance each year. I am thinking that I can then access most of the pot tax free. Does this make sense or am I missing something obvious?

If there was no investment growth (or loss) i'm not sure you could get most of it out in the time you have.

You have about £49k which would be taxable so over 7 years that is £7k/year. Which would take you well over your Personal Allowance (and that is assuming you haven't applied for Marriage Allowance and have a lower than normal PA).

You could have £10-15k left by the time you are 66. Although if the State Pension was to replace the current £3.5k earnings then you could potentially continue to have a bit of spare PA.

Have you considered purchasing additional NI years to get your State Pension upto £164?

tiptoes27

Thank you. I work in a zero hours contract job which I think could end at any time so my only income would be from the rental. I was hoping the draw down so I could change the amount as required. Is this how it works?

tiptoes27

And also is it worth shopping around for a flexible draw down like you do with an annuity?

Dazed_and_confused

And also is it worth shopping around for a flexible draw down like you do with an annuity?

Different providers will have different charges. No doubt some more experienced posters will comment on this aspect.

Dazed_and_confused

Thank you. I work in a zero hours contract job which I think could end at any time so my only income would be from the rental. I was hoping the draw down so I could change the amount as required. Is this how it works?

Basically yes. If you get the right product you can choose how much to withdraw so changing amounts to suit your tax circumstances is quite normal. Don't forget if you take any taxable income you will be limited to how much you can contribute in future. Currently this would be limited to £4k (gross)

tiptoes27

Thank you for taking the time and trouble to reply. Much appreciated.

System

Dazed_and_confused wrote: »

Don't forget if you take any taxable income

Note that "taxable" means potentially subject to tax, not necessarily exceeding your tax allowance and being actually taxed in your case.

whatsup7

tiptoes27 wrote: »

And also is it worth shopping around for a flexible draw down like you do with an annuity?

Money observer magazine this month in WH Smith’s has a good piece on drawdown charges at different places

Malchester

Thanks for this post. I am in the same position as OP. I am retiring later this year. Have two DB pensions paying less than new personal allowance (which includes marriage allowance taking it to c£13,700 from April). My DC pension will be valued at around £8,500 when I retire. Was thinking of taking 25% tax free and than an amount each year, keeping me below personal allowance level, until state pension kicks in in 2025 (which is estimated to be greater than the basic (current statement says £169/week compared to standard pension of £164/week)

dunstonh

Or flexible draw down account.

I think you mean flexi-access rather than flexible. It may seem semantics but flexible drawdown is something different to flexi-access. If you have flexible drawdown then there is a different set of rules.