Taking money from a DC pension pot

agent69

I'm 62 and retiring in a couple of months.



I have about £250k in a company DC pension pot with Scottish Widows, that is administered by an IFA appointed by the company. I intend to take the maximum tax free amount (circa £16k PA) and top it up from personal savings (about £200k in ISA's, bonds, savings accounts) until my DB scheme kicks in at 65.


The IFA says that SW don't offer the sort of flexible drawdown that I am looking for, so the funds will have to be moved to another provider. Are there any pifalls in such a proposal?

OldMusicGuy

No, unless you have any guaranteed benefits associated with the SW scheme that you would lose if you transferred it (like guaranteed annuity rates). Check the scheme documentation, hopefully the IFA should be able to explain if there are any.

The only "pitfall" is that you will have to manage the funds once you transfer them rather than have the IFA do it (unless you pay an IFA to do it for you). Also, your tax free amount seems low. Why not transfer it all to a SIPP first as you should have access to 25% tax free.

dunstonh

The IFA says that SW don't offer the sort of flexible drawdown that I am looking for, so the funds will have to be moved to another provider. Are there any pifalls in such a proposal?

No. Its routine. A few things to look out for but that is the IFA's job, if you are using them.

However, whilst the transaction is routine, your justification may not be and the IFA may struggle with that (or at least tell you its wrong and put you through as an insistent client going against advice). The general rule of thumb is only to take the 25% out when you need it for a spending need. If you have savings that can cover that need, usually you would not take it out of the pension without some justification.

If funding the gap until DB pension is paid, then phasing the TFC along with some of the 75% taxable chunk may be a better option if it's over multiple tax years.

So, your method may not be optimal. A few lines of text leaves a lot of detail missing.

Albermarle

I think the OP means he will take 25% tax free but not all at once . At a rate of £16kpa it will last nearly 4 years until the DB scheme kicks in .
SW do offer flexi drawdown but probably the pension you are in is old and you would have to transfer to a new pension product with SW or another provider. Although it is not clear from SW website if you can take the 25% TFLS in stages , so that might be the problem.
A transfer to another pension provider is not a big deal and something you can do yourself on line.
You can look at similar big insurers to SW like Aviva or Standard Life or look at the various SIPP providers.

xylophone

You could move to a SIPP if you are willing to manage it yourself.

https://www.moneyobserver.com/best-sipp-platforms-your-portfolio-2018

HL is regarded as expensive but do not charge for drawdown.

Have you obtained a new state pension statement?

https://www.gov.uk/check-state-pension

agent69

Sorry if my original post was a bit vague.


When I retire in a couple of months time I will be looking to take money from my DC pot (supplemented by savings) until my DB pension kicks in at 65.



I am currently cash rich and the last thing I want is having to find a home for 25% of £250k tax free. The plan is to take £16k / year, with 25% tax free (£4k) and the balance of £12k equating to my tax free allowance - therefore no tax.


I intend to retain the servives of the IFA.

OldMusicGuy

agent69 wrote: »

I am currently cash rich and the last thing I want is having to find a home for 25% of £250k tax free. The plan is to take £16k / year, with 25% tax free (£4k) and the balance of £12k equating to my tax free allowance - therefore no tax.

Makes sense, I am pursuing a similar strategy. I transferred several older pensions to my HL SIPP to give me this flexibility. You don't need an IFA to do the transfer it if the SW pension is a true DC one. It's very straightforward, although if you want help choosing the SIPP and also the investments within it, that's where you could use an IFA.

Albermarle

£16k / year, with 25% tax free (£4k) and the balance of £12k equating to my tax free allowance

To do this you need a pension provider who supports UFPLS withdrawals. Most do ( some have a specific charge for it ) but not all.