Drawdown and flexi access help

richiereynolds

Hi, I would like to:

1. take a 25% tax free lump sum from my DC pension when I'm 55
2. Move the remainder into a flexi drawdown pot which I won't touch so as not to trigger MPAA
3. Continue to pay into my DC pension geting my full tax relief
   

Is that pie in the sky or possible? E.g. when I take the lump sum and move the rest to a drawdown pot, is my existing pension effectively "closed" or does it now simply have a balance of 0 allowing me to continue to build up funds again so I can take another 25% tax free from it at a later date?

Sorry, complete innocent in this, thanks for any help!

zagfles

It's possible, but different providers do it differently, some have separate "crystallised" and "uncrystallised" pots, so you'd have a zero uncrystallised pot, which you'd need to tell the provider to keep open for future contributions (you might need to leave a token amount in). Others do it as a %, so you'd have 100% crystallised and then as you add to it the % crystallised would go down.

richiereynolds

Cheers! I'll ask aegon some specific questions then.

gm0

You can save at the normal annual allowance for your income tax band until you take the first penny of income from the crystallised pot above and beyond tax free cash.  If you plan to save more from employment this cut to annual allowance is definitely to be avoided

Future savings will create 25% possible future tax free cash from the new uncrystallised savings but not affect the existing ones where you have had all the tax free cash (assuming you take "the lot") - you don't have to.  It can be done in slices of 25% with 75% moving to the "crystallised" for drawdown state. Slicing can often be a superior solution overall but this is very dependent on all your circumstances and why you want to access the tax free cash in the first place.

If this isn't all in a modern open market SIPP then be aware that the mechanics of older and occupational schemes vary widely in what is actually supported.  Check carefully before starting the chain of events if it is one of those.

Albermarle

1. take a 25% tax free lump sum from my DC pension when I'm 55

It is a kind of tradition on this forum that when someone makes the above statement , that someone asks the question why ? The reason being is it seems many people take the tax free sum 'because it is there' and do not have any plans on what to do with it . In that case it is better left where it is . So hopefully you have a good reason for taking it all at once ?

richiereynolds

Cheers, if I known had the terminology originally I think I would have asked is "slicing" a thing. Good descriptive term for what I'm after.

Yes, it's a modern SIPP, but I'll check all the details with the provider.

Reason is I want to buy a small propery abroad and this is one option for raising the cash. I could always put les sinto my pension and save, but I'm a higher rate tax payer so like the tax relief. Could also get a mortgage, but at 55, and for a property abroad and with still some years left on my local mortgage, that sounds like it could be painful. I also see the propery abroad as a diversified investment towards my pension, it' spossible I could move there parmanently later. Luckily I'm from Northern Ireland and have an Irish passport ...