Tax free sum and drawdown confusion.....

Andyaero

Hi all, newbie here so please be gentle!
I'm 53 and have a company pension that will amount to approx £360k in 2 years time, I'm a higher rate taxpayer. I'd like to take 25% to purchase a narrowboat to liveaboard.
Now, prior to my starting to investigate this, I believed I could just take the £90k and leave the rest to a later date, say 7 years time when I would retire. 
However am I correct in thinking this is not possible? I have to take the whole pension, I can still have my lump sum, but the rest has to start giving me an income (drawdown)?
I don't really want this as it'll be taxed at 40% and as I'll still be working for a few years yet, don't need it. Is it inevitable that if I take my lump sum, the rest will be taxed or are there investment practices that find a way around that?
I think what I'm asking is how does the drawdown/ annuity market work?
Thanks!

dunstonh

Now, prior to my starting to investigate this, I believed I could just take the £90k and leave the rest to a later date, say 7 years time when I would retire. 
However am I correct in thinking this is not possible?

Its possible.  It is called income drawdown and you take a nil income.  The 75% segment remains invested until you want to start an income.

sleepyOwl

My colleague has just done this. However he had to transfer his pension to a siip. He left a small amount in his company pension as this also gives death in service benefit. He crystallised £100k of his pot and took £25k. The remaining £75k is still invested. Crystallising keeps a track of how much of your total 25% has been used I believe. Definitely will need some independent advice though 

xylophone

With regard to this company pension,  can you confirm that this a defined contribution/money purchase type rather than a Defined Benefit type?

Are you saying that you are seeking to access this pension but also remain  with the same employer and continue to contribute to the scheme?

Andyaero

Yes and Yes, if I can?

xylophone

Yes and Yes, if I can?

I suspect that you would need to check whether you could transfer out the money in the workplace pension  (or part thereof) to eg a SIPP  (so as to access the PCLS and leave the balance undrawn) but remain a member of the scheme and continue to contribute.

The scheme might well not permit this.

TVAS

You need to ask the scheme. If the scheme rules say no you cannot do it. Some schemes allow partial transfers some do not.

You say you are a 40% tax payer have you not considered paying more money into the scheme so that you are a 20% tax payer so less tax paid and more into your pension. Just a thought.

3card

TVAS said:

You need to ask the scheme. If the scheme rules say no you cannot do it. Some schemes allow partial transfers some do not.

You say you are a 40% tax payer have you not considered paying more money into the scheme so that you are a 20% tax payer so less tax paid and more into your pension. Just a thought.

Not sure if i am correct but i read that to say IF they started taking their pension it would take them into the 40% tax bracket (but i could be wrong)

Albermarle

I think what I'm asking is how does the drawdown/ annuity market work?

These are two different things so do not get them mixed up .

With an annuity you use your pension pot ( usually after you take the 25%tax free) to buy a guaranteed income for life . This can be inflation linked and have facility for a spouses pension on your detail. The more extras the less annual pension you get for your money . When you die the pension dies with you ( spouse pension notwithstanding)

With drawdown you keep the pot invested and drawdown income from it as and when needed, so it needs more management/thinking about . The potential downside is that if you take too much income and/or the investments do not perform , the pot can run out . The upside is that there can be money left in the pot when you die to leave for your heirs .