Defined contribution pot options

armour999

I am 57 and have approx £100,000 in a DC pension pot and am considering taking, firstly 25% tax free, and then the rest out bit by bit over the next few years in order to only pay 20% tax on the amount I withdraw. I have no income from work this financial year but will have had about £16K income from property and a small DB pension by the end of this financial year. This is about £10K less than my usual property/pension income due to a non-paying tenant, eviction costs and a flat refurbishment.

My plan is to withdraw as much as possible without straying into the 40% tax bracket over the next few years. I do not need the money at the moment but don't expect to ever be in a position whereby I do not have income from property/pension/work which is less than the basic personal allowance.

I am reluctant to withdraw the money from the provider (Standard Life) as over the last couple of years the pension pot has averaged 5-6% growth with the provider charging a 0.3% fee and I would like this to continue.

Can anyone point me in the direction of a suitable investment or pick any holes in my pension withdrawal plan?

Thanks,

Chris.

Albermarle

Why take the 25% tax free out first , have you any plans for spending it ? If not leave it where it is and take it out later/gradually .
It could be a good way to keep below the 40% tax rate some years.

Thrugelmir

Difficult not to have made reasonable sums of money over the past few years. The challenge will be to maintain such a level of return going forward. As the price at which markets trade doesn't neccessarily reflect company fundamentals. Ultimately investments will require taking a certain of level of risk and suffer volatility. What is your money currently invested in? 

tetrarch

Albermarle said:

Why take the 25% tax free out first , have you any plans for spending it ? If not leave it where it is and take it out later/gradually .
It could be a good way to keep below the 40% tax rate some years.

Because the TFLS will be the perfect target for the Government when they realise that any flat-tax-relief proposal will produce exactly the wrong incentives for people to sabe for their future.

Minimising the TFLS (especially if it is capped by vallue) will proportionally hit those with larger pots harder. This is "fair" and will be sold as a consumer protection measure

Regards

Tet 

PS - All of the above is just my opinion

armour999

Albermarle said:

Why take the 25% tax free out first , have you any plans for spending it ?.

I hadn't thought of that. I'll investigate with Standard Life

Tet said:

Because the TFLS will be the perfect target for the Government when they realise that any flat-tax-relief proposal will produce exactly the wrong incentives for people to sabe for their future.

Are there plans for this to happen? Surely any rule change would be advertised beforehand allowing me to get the 25%TFLS out?

If there IS a possibility of such an unanounced pension grab, I guess I should get the 25% out before FY year end.

BTW, regarding any increase in the residual amount left in the pension plan after the initial 25% and first tranche has been taken out, will 25% of this be allowed to be withdrawn tax free?

Thrugelmir said:

 What is your money currently invested in? 

Standard Life Managed Pension Fund 100%

Is this a good fund? It's the one that was set up by my firm and, since I left, Standard Life  have kept on with the 0.7% discount off their standard management fee of 1% of the fund total.

I'm minded to place the withdrawn pension funds in one of their (non-pension) funds.

I  welcome any further comments/advice.

Chris

NedS

armour999 said:

Albermarle said:

Why take the 25% tax free out first , have you any plans for spending it ?.

I hadn't thought of that. I'll investigate with Standard Life

Tet said:

Because the TFLS will be the perfect target for the Government when they realise that any flat-tax-relief proposal will produce exactly the wrong incentives for people to sabe for their future.

Are there plans for this to happen? Surely any rule change would be advertised beforehand allowing me to get the 25%TFLS out?

If there IS a possibility of such an unanounced pension grab, I guess I should get the 25% out before FY year end.

BTW, regarding any increase in the residual amount left in the pension plan after the initial 25% and first tranche has been taken out, will 25% of this be allowed to be withdrawn tax free?

In theory the Chancellor can do anything (s)he wants, and could announce such a measure effective immediately. That said, I doubt you would not get at least some notice, even if it's only a very short amount. Personally, I think higher rate tax relief is a more likely target for the Chancellor than the TFLS, but that's just my opinion.

Albermarle

Possible changes to the pension tax regime are floated every year before the budget/spending review. You can not base your investment plans on pure speculation. The 25% TFLS is popular with small and larger investors so will probably be well down the list after stopping 40% tax relief and closing the salary sacrifice loophole .
BTW, regarding any increase in the residual amount left in the pension plan after the initial 25% and first tranche has been taken out, will 25% of this be allowed to be withdrawn tax free?
 For every Pound you take as tax free cash £3 is crystallised and can only then be withdrawn as taxable income .
So if you took £25K tax from your £100K pot , then the remaining £75K would be crystallised and no more tax free cash available . If you only took £10K tax free cash then £30K would be crystallised leaving £60K uncrystallised . You could then take 25% tax free of this at a later stage.
Have a good look at Standard Life's website as it explains all the options pretty well.

tetrarch

armour999 said:

Albermarle said:

Why take the 25% tax free out first , have you any plans for spending it ?.

I hadn't thought of that. I'll investigate with Standard Life

Tet said:

Because the TFLS will be the perfect target for the Government when they realise that any flat-tax-relief proposal will produce exactly the wrong incentives for people to sabe for their future.

Are there plans for this to happen? Surely any rule change would be advertised beforehand allowing me to get the 25%TFLS out?

If there IS a possibility of such an unanounced pension grab, I guess I should get the 25% out before FY year end.

BTW, regarding any increase in the residual amount left in the pension plan after the initial 25% and first tranche has been taken out, will 25% of this be allowed to be withdrawn tax free?

I just wouldn't want to take the risk. IF it were changed with a long deadline then the targetted taxpayers would remove a whole swathe of tax-eligible funds in very short order. It would be like blowing whistles before going "over the top"

armour999 said:

BTW, regarding any increase in the residual amount left in the pension plan after the initial 25% and first tranche has been taken out, will 25% of this be allowed to be withdrawn tax free?

Your 25% will crystallise a percentage of your LTA vs the current allowance.

armour999 said:

Thrugelmir said:

 What is your money currently invested in? 

Standard Life Managed Pension Fund 100%

Is this a good fund? It's the one that was set up by my firm and, since I left, Standard Life  have kept on with the 0.7% discount off their standard management fee of 1% of the fund total.

I'm minded to place the withdrawn pension funds in one of their (non-pension) funds.

I  welcome any further comments/advice.

Chris

Hi Chris,

I was in the same fund with the same discounts. It does depend on your risk tolerance, it's a lifestyle fund butwas too FI-focussed for my taste

When I took the TFLS I was allowed to choose from their fund suite, but I lost the discount...
When I take all my TFLS's, I'm going to consolidate, but I reinvested in something similar, but with a "4" out of 5 risk rating

Regards

Pheid