MSE Guide to taking Pension 2017

toesonthenose

In the very helpful MSE guide to taking pension 2017 its 40 pages long can and can be found in the MSE site under the banking and savings tab and then the link to "Guide to taking your pensions" under the pensions heading - sorry I can add a url.

it lays out 5 options for taking money out of ones defined contribution pension.

Im ignoring options 1, 2 and 5 as they are not relevant to my situation.

On page 17 of the document it says "you can mix your options at different times".

This sounds like I can in one tax year take one, two or more Option 3 (which I believe is a UFPLS) 25% of which would be tax free (I know unlikely to happen in practice). In another year I could put a proportion of my funds into Flexible Drawdown, Option 4 and also take a UFPLS. In the same year I do not actually have to draw any income down from the funds in flexible drawdown but I would take 25% of the sums put into flexible drawdown tax free.

The SIPP provider charges wouldnt necessarily make sense doing this not to mention the complexitiy of doing it either but lets ignore this issue for now.

Im not for one minute saying I am thinking of doing this I just want to know if I have understood the rules correctly and if it is completely flexible.

The most likely scenario is that I will put a proportion of my fund into Flexible Drawdown and because I will have to spend a largish sum on my home I will fund that in the same tax year by taking a UFPLS. Obviously I will keeping a close eye on the income tax situation so I may have to phase this over multiple tax years.

In the unlikely event that I dont spend all of the cash I got out on the project can I then invest it in an ISA?

Thanks in advance for your help.

Pension_Geek

Not really sure if this will answer the question as its a bit hard to follow, but;

if you have say £100,000 in Uncrystallised funds, you could take say, a £10,000 UFPLS, of which £2500 would be tax free and the reamining £7500 would be taxable.

THis would leave £90,000 in the pot. IF you repeat the abvoe, it would then leave £80,000.

If you then designate the £80,000 to drawdown, you could take £20,000 tax free. Any subsequent withdrawals would be taxed at your marginal rate.

dunstonh

In the very helpful MSE guide to taking pension 2017 its 40 pages long can and can be found in the MSE site under the banking and savings tab and then the link to "Guide to taking your pensions" under the pensions heading - sorry I can add a url.

Oh, they updated it in 2017. That's good as the previous version was woefully out of date and had incorrect ifnroamtion for over 8 years.

The SIPP provider charges wouldnt necessarily make sense doing this not to mention the complexitiy of doing it either but lets ignore this issue for now.

Most pensions do not have any charges for using the various drawdown methods. Some do but you should not let the provider dictate how you retire and fund it. You would change to a provider that is best for you.

Phased flexi access drawdown is very popular and most providers support it. Whether it is phased regular or phased ad-hoc payments.

toesonthenose

The question I would like answering is can I make multiple withdrawals using UFPLS and also make a transfers into Flexi Drawdown and withdraw income from it all in the same tax year.

Simple question really but I havent found the answer anywhere other than the simple reference in the doc that says "you can mix your options at different times".

So if I made the following withdrawals in the same tax year i) two withdrawals using UFPLS (25% tax free and rest taxed as income) and ii) one transfer into flexi-drawdown and took part of the transfer as tax free (25%) and iii) also drew say 5% of remaining funds in flexi draw down (also taxed as income).

Lets say that used up 50% of my funds in my DC SIPP, then I did this again in the following tax year so all of my funds are now in flexi drawdown or taken as UFPLS.

Is this allowed under the legislation?

Sorry if my initial post was too difficult to understand !

dunstonh

The question I would like answering is can I make multiple withdrawals using UFPLS and also make a transfers into Flexi Drawdown and withdraw income from it all in the same tax year.

yes........

toesonthenose

Many thanks.

Pension_Geek

One thing to bear in mind is that if you use UFPLS you will trigger the reduced MPAA.

I have to say, I don't really follow the logic of using UFPLS and Drawdown simultaneously, but I'm sure that there might be a scenario where it is beneficial.

Its always been my view UFPLS is best for getting rid of a small pension pot where the provider doesn't offer flex access. Phased drawdown seems to me to be a far superior strategy if available.

cloud_dog

The other thing to bear in mind is that you may get put on some weird/high tax coding because income drawn from pensions is based around the concept used in monthly PAYE. Obviously you can settle up and reclaim overpaid tax at the end of the tax year but these random ad-hoc withdraals are likely to have this effect.