How much DD and when & 25% Tax Fee

dunstonh

Nick9967 said:

and can i vary its annual amount until I've used that 25% allowance?

You will never use up the 25% lump sum if each withdrawal is split 75/25.   You will only use it up if you take a greater amount of the withdrawal as the tax free withdrawal.

Confused my self now,
Example:
Total Pot is £300k 
Semi retire at 58 PT working at £9k pa
take £60k tax free
Remaining draw down at £8,500 pa  does that mean £2,125 (25% of 8500) is tax free? regardless of annual income , and will that 2125 tax free stop at year 7 as by then i will have used up my original £75k (25%) tax free allowance?

I read your other post as if you were not taking the 25% at the outset.    On this example you are.

So, on this example, if you are taking £60k up front, that means you are crystallising £240,000 of your pension with £60k paid as tax free cash and 180k moved into the crystallised segment.    That leaves £60k uncrystlalised (the difference between 240k and 300k).  You can still take 25% of the uncrystallised amount at any time.  If you draw a regular income from the uncrystallised amount then that will be 25% tax free/ 75% taxable.   If you draw a regular income from the crystallised amount then it will be 100% taxable. 

If you took the remaining £15k (or whatever value it becomes in the time) as a tax free cash, then that would move 100% of your pension into crystallised funds and you would have no tax free cash left.

If you didnt take any tax free cash at the outset and only crystallised what you were drawing each month then each monthly payment would be 25% tax free with 75% taxable above your personal allowance.    Your pension fund would remain 100% uncrystallised and always have a 25% available from it.

squirrelpie

dunstonh said:

Nick9967 said:

and can i vary its annual amount until I've used that 25% allowance?

You will never use up the 25% lump sum if each withdrawal is split 75/25.   You will only use it up if you take a greater amount of the withdrawal as the tax free withdrawal.

Confused my self now,
Example:
Total Pot is £300k 
Semi retire at 58 PT working at £9k pa
take £60k tax free
Remaining draw down at £8,500 pa  does that mean £2,125 (25% of 8500) is tax free? regardless of annual income , and will that 2125 tax free stop at year 7 as by then i will have used up my original £75k (25%) tax free allowance?

You can still take 25% of the uncrystallised amount at any time.  If you draw a regular income from the uncrystallised amount then that will be 25% tax free/ 75% taxable.

...

If you didnt take any tax free cash at the outset and only crystallised what you were drawing each month then each monthly payment would be 25% tax free with 75% taxable above your personal allowance.

These statements go back to the OP's original questions. Whether those statements are true or not depends on the provider. For example, I do not believe that H-L, to take one example, offer this facility. With them, you must take whatever tax-free cash you want (up to 25% of course) as a lump sum when you enter drawdown, i.e. when you crystallise all or part of your funds. You cannot receive individual payments that are part-untaxed and part-taxed except by using UFPLS and each such payment has to be separately authorized.

Perhaps dunstonh's statements are true for some other providers (I expect they are!) in which case it would be relevant to the OP's questions to know which providers. And I would be interested in the answer as well.

LHW99

Also it depends on your provider (and the age of the scheme). Modern platforms like HL / AJBell / II etc would cope pretty well, but older schemes / providers may not so you could have to transfer before you start.

Nick9967

The more this post goes on the more I'm convinced that i need a professional to take care of my "best plan", there's a huge difference between those variations , tax etc 
Thanks all for your time seems i have lots to learn!

Albermarle

For example, I do not believe that H-L, to take one example, offer this facility. With them, you must take whatever tax-free cash you want (up to 25% of course) as a lump sum when you enter drawdown, i.e. when you crystallise all or part of your funds. You cannot receive individual payments that are part-untaxed and part-taxed except by using UFPLS and each such payment has to be separately authorized.

Although flexi access drawdown ( as mention frequently by Dunston ) looks a good drawdown method for some people, I am wondering if only a few providers offer it and mainly those often associated with IFA's like Royal London ?

zagfles

Albermarle said:

For example, I do not believe that H-L, to take one example, offer this facility. With them, you must take whatever tax-free cash you want (up to 25% of course) as a lump sum when you enter drawdown, i.e. when you crystallise all or part of your funds. You cannot receive individual payments that are part-untaxed and part-taxed except by using UFPLS and each such payment has to be separately authorized.

Although flexi access drawdown ( as mention frequently by Dunston ) looks a good drawdown method for some people, I am wondering if only a few providers offer it and mainly those often associated with IFA's like Royal London ?

All drawdown is now "flexi access", except for drawdown set up before the pension freedoms, which was either flexible (where you had to prove a high secured income) or capped (where you couldn't).

There are loads of ways of essentially achieving the same thing, some are easier admin wise with some providers but harder with others and vv. But most will offer the same basic options. Full drawdown, phased drawdown, or UFPLS.

zagfles

Nick9967 said:

The more this post goes on the more I'm convinced that i need a professional to take care of my "best plan", there's a huge difference between those variations , tax etc 
Thanks all for your time seems i have lots to learn!

The difference isn't really that great, it basically comes down to the timing of taking the tax free cash. You can take it all in one go (full crystallisation) but then you'll end up with a large lump sum and if you don't need it, it might be better leaving it in the pension.

You can phase drawdown, by splitting the pot eg crystallising £100k of the pot, taking 25% of that part tax free ie £25k, and then you have £75k available for taxable drawdown which you can take whenever you want - ie it could last a good few years. You pay tax when you draw it, usually PAYE as if it was employment income (but no NI). The rest of the fund remains uncrystallised. Then when the £75k drawdown runs out you could repeat with another £100k chunk of the pension.

Or you can take periodic UFPLS, this is basically taking lumps out of the pension, of which 75% will be taxable and 25% will be tax free. The rest of the pension remains uncrystallised, and you can repeat as often as you like, or change to phased/full drawdown if you want.

squirrelpie

zagfles said:

There are loads of ways of essentially achieving the same thing, some are easier admin wise with some providers but harder with others and vv. But most will offer the same basic options. Full drawdown, phased drawdown, or UFPLS.

Do you know if there is a list or table anywhere that identifies what is possible with various providers? Or can you even name any providers that can provide the "each monthly payment would be 25% tax free with 75% taxable" facility that dunstonh suggests?

zagfles

squirrelpie said:

zagfles said:

There are loads of ways of essentially achieving the same thing, some are easier admin wise with some providers but harder with others and vv. But most will offer the same basic options. Full drawdown, phased drawdown, or UFPLS.

Do you know if there is a list or table anywhere that identifies what is possible with various providers? Or can you even name any providers that can provide the "each monthly payment would be 25% tax free with 75% taxable" facility that dunstonh suggests?

That's basically a UFPLS every month. So it's doable with any provider that offers UFPLS. How easy the admin would be, I don't know. If it's a hassle, I'd go for periodic phasing as mentioned above, eg crystallise in £100k chunks (or less - perhaps £80k chunks which would make a nice round £20k TFLS which could go into an ISA)

dunstonh

squirrelpie said:

zagfles said:

There are loads of ways of essentially achieving the same thing, some are easier admin wise with some providers but harder with others and vv. But most will offer the same basic options. Full drawdown, phased drawdown, or UFPLS.

Do you know if there is a list or table anywhere that identifies what is possible with various providers? Or can you even name any providers that can provide the "each monthly payment would be 25% tax free with 75% taxable" facility that dunstonh suggests?

I would expect virtually every provider/platform to do it.