Moving pension to drawdown

Hudsonbutler · 4 July 2020 at 7:02AM

Hi, This great forum has helped me many times in the past. I have a pension with Zurich and would like to free up my 25% tax free lump sum.
Unfortunately they do not offer drawdown, so I will have to move it to another provider. I am 60 years old and this was taken out when I was 28. The original pension with eagle star was a serps/sp2 pension, Zurich took over around 2004. I didn't contract back in. The pension is now worth £133,000.
I need to replace an ageing conservatory with an extension, as the conservatory is getting a little bit old now, and an extension would be better for the future.
I'm looking at approx £33,000 lump sum, which would be adequate to fund the extension.
My question is, would a drawdown be good, to leave the approx £100,000 invested and if needed draw a little bit more before I retire.
Would like to add, I'm not a confident person where investments are concerned, and would like to know if there are any companies that are good for drawdown pensions, I note companies like aj bell are mentioned on here quite regularly. Thanks.

gm0 · 4 July 2020 at 8:13AM

Welcome back. Consider the following:

1. It is possible they will add a drawdown option - some schemes do. But many do not. Fund range likely to remain restricted. Costs are good or bad per your specific scheme. Likely to be insured (regulatory protection to full value).

2. search for the snowman spreadsheet for comparison of costs of retail SIPPs (Which will offer drawdown, not insured like occupational - just 85k protection.

3. AJBell comes up a lot - and is on my short list along with Fidelity and Vanguard (latter is cheap but with a restricted range of their own funds, drawdown process due to be implemented later in 2020 so if you want it right "now" they may get screened out. To make sense of a range and costs compare you need to have a view on your trading and drawdown behaviour (how often) and desired asset allocation.

4. IFAs will have "wholesale" SIPPs to offer you from other players as part of their service.

5. Don't forget the annual allowance gets cut if you take a penny more than your tax free PCLS i.e. if you touch marked for drawdown funds. So if you want to top up. Don't let that trip you up

Hudsonbutler · 4 July 2020 at 8:26AM

Thank you for your reply. I have contacted Zurich and they have said they do not offer drawdown as of yet.
I will have a look at snowman spreadsheet.
Drawdown process to be implemented. Is this new legislation coming in?
I think I'm going to need an ifa.
Don't think I'll be making any more contributions, as nothing has been paid in since the s2p was stopped in 2012.
Thanks

Hudsonbutler · 4 July 2020 at 9:21AM

Just read the pensions drawdown legislation coming in. It appears that this will be in August. So I think I can wait until then, as the need for plans etc will take a while and winter is coming. Thanks 👍

Albermarle · 4 July 2020 at 10:44AM

Not sure what you mean about new drawdown legislation , it is freely available now and has been for some years.

The fact it was a SEPRS/S2P related pension is not relevant for the future. It is just the same as any other standard DC pension.
My question is, would a drawdown be good, to leave the approx £100,000 invested and if needed draw a little bit more before I retire.
You can take the 25% tax free ( or part of it ) and leave the rest invested as now. You can withdraw funds from it any time you like but once the 25% tax free cash has been taken , then anything will be taxable in the same way your income is taxed . So if you were still working then it would be added to your employment income for tax purposes. The state pension is also taxable in the same way.
Would like to add, I'm not a confident person where investments are concerned, and would like to know if there are any companies that are good for drawdown pensions,
There are many reputable companies that offer drawdown pensions. The issue is not so much which pension provider you pick, but what investments you hold within the pension.

Hudsonbutler · 4 July 2020 at 11:05AM

Thanks, I believe the drawdown legislation coming in is for people like me who don't understand the jargon.
It should put it into plain words, pounds and pence what the costs are. Think I've interpreted it right. Lol.
My belief in a drawdown is you have your 25% lump sum, then say 12 months later if more is required, then you take out what you need, but, this sum is subject to tax at the rate you pay, ie there is no 25% relief, yes. Or do you still get 25% because it's another tax year?
I really didn't want to move it because it's done really well over the years, especially the last 4, this year not as good for obvious reasons. But it's not an option with Zurich, I'm not going to take a small mortgage out, as financially I couldn't afford one . So this is the best option.

Linton · 4 July 2020 at 11:20AM

My belief in a drawdown is you have your 25% lump sum, then say 12 months later if more is required, then you take out what you need, but, this sum is subject to tax at the rate you pay, ie there is no 25% relief, yes. Or do you still get 25% because it's another tax year?

After the first 25% tax free all the drawdown you take is taxed under PAYE, in the same way as wages. There is no second bite at the 25% cherry.

JoeCrystal · 4 July 2020 at 11:21AM

Hudsonbutler said:

Thanks, I believe the drawdown legislation coming in is for people like me who don't understand the jargon.
It should put it into plain words, pounds and pence what the costs are. Think I've interpreted it right. Lol.

Could you supply a link to a report about this incoming legislation in particular? I haven't heard anything about it either.