Taking pension out as cash rather than annuity. can the amounts be spread over tax years?

sololite

Hi All.

I have a Pegasus pension with a retirement date in November this year. Scottish Widows have written to me to ask me how I would like to take it. I parted company with the IFA who advised me to take it many years ago and I have been managing it myself. I have a health condition which makes me want to take the pension as cash rather than annuity. I understand I can take 25% tax free. Is it possible to take the remainder in instalments across 3-4 years to stop hitting the 40% tax bracket? does it depend on wether Scottish Widows allow it or not, or is it a right I have?

Thanks for all advice.

Sololite

Dazed_and_confused

If you have the correct product (which in some circumstances means moving companies) you can take it as you wish.

Many who post on here opt for 25% of each payment being tax free rather than taking 25% up front.

tacpot12

The pension rules allow you to take the cash in installments over as many years as you want. However, the rules don't dictate that every pension provider must allow this or restrict what they can charge to do so.

Most providers will make some charge for administering the withdrawal of cash, if only because they have to pay the tax on the remaining 75%. There are some who provide a withdrawal service for free. So you need to ask Scottish Widows whether they provide the service and at what cost. If the cost is going to be more than a £150 per annum, you could consider transferring the cash to a Self-Invested Personal Pension and withdraw it from there. Cost of withdrawing the cash should be no more than £150 pa.

Albermarle

Two ways to do what you want :

Drawdown - Means taking the 25% tax free cash and then the rest can be taken as and when but is subject to tax .
UFPLS - Means taking payments from the pension, where each payment is 25% tax free and the rest taxable
Either could suit your needs but the critical thing is whether your current pension can support either form of withdrawal . Most older ones can not, and if that is the case then you will need to transfer to a new pension, either with SW or someone else.
Probably best to give SW a call to clarify the situation

sololite

wow, that was quick - thanks everyone. I will call Scottish Widows. I love it when they tell me that mine is a 'legacy' product. They don't see the irony that all there current products will be 'legacy' when their customers want to access their pension

sololite

Scottish Widows tell me that the pension has a guaranteed annuity rate of 9% which is making me think I should take that rather than draw down over several years, which they tell me I could do but will incur charges. does that make sense?

JoeCrystal

sololite wrote: »

Scottish Widows tell me that the pension has a guaranteed annuity rate of 9% which is making me think I should take that rather than draw down over several years, which they tell me I could do but will incur charges. does that make sense?

Considering that the annuity range between 2.88% to 4.39% @ 65 at the moment depending on the type. Does it have an index-linked element and is it single or joint life?

SonOf

I love it when they tell me that mine is a 'legacy' product. They don't see the irony that all there current products will be 'legacy' when their customers want to access their pension

Their current product is not a legacy plan as it's coded to allow changes and on a flexible contract. Legacy plans are hard coded on software and cannot be changed easily or cost effectively.

Scottish Widows tell me that the pension has a guaranteed annuity rate of 9% which is making me think I should take that rather than draw down over several years, which they tell me I could do but will incur charges. does that make sense?

Its a valuable rate. It also means that if the fund is over £30,000 and you still want to draw it using UFPLS or drawdown, you would need to use an adviser.

xylophone

the pension has a guaranteed annuity rate of 9%

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/495377/pension-benefits-with-a-guarantee-factsheet-jan-2016.pdf

sololite

JoeCrystal wrote: »

Considering that the annuity range between 2.88% to 4.39% @ 65 at the moment depending on the type. Does it have an index-linked element and is it single or joint life?

Thanks Joe. It is single life and I will ask them about any index linking.

lisyloo

sololite wrote: »

Scottish Widows tell me that the pension has a guaranteed annuity rate of 9% which is making me think I should take that rather than draw down over several years, which they tell me I could do but will incur charges. does that make sense?

Depends on your health condition.
You earlier said you wanted to withdraw ASAP due to health.
If you mean you don’t expect to live very long then even 9% may not be good for you.
An annuity means you’ll get income until you die but there will be nothing left afterwards (unless there is a min payment period).
So if you died just after year 1 you’d only get 9% and that’s it.
Of course if you live for decades then it’s great.

In general that’s a fantastic rate but if you meant you don’t expect to live very long then it’s not necessarily best for you or did you mean something else? Such as being much less active in 3-4 years?