Drawdown in Practice

jim8888

Thanks guys, the way I'm looking at this is that the lump sum is now driving the crystallisation of the pot. I was going at it the other way around. I was looking at the pot growing to maybe 500k and that was driving the lump sum payment of £125k. However, if I budget that I'll need a £20k lump sum in my first year, then that crystallises £80k of the pension fund which can no longer be used as tax free. I think that's right, and allows me to build a 3 to 5 year plan with more confidence now.

Albermarle

jim8888 said:

Thanks guys, the way I'm looking at this is that the lump sum is now driving the crystallisation of the pot. I was going at it the other way around. I was looking at the pot growing to maybe 500k and that was driving the lump sum payment of £125k. However, if I budget that I'll need a £20k lump sum in my first year, then that crystallises £80k of the pension fund which can no longer be used as tax free. I think that's right, and allows me to build a 3 to 5 year plan with more confidence now.

After doing that you will have £420 K uncrystallised ; £60K left in the pension as crystallised funds that will be potentially taxable when withdrawn ( whether they will be actually taxed depends on your tax position at the time ) and £20K in your pocket.
The provider may split the crystallised and uncrystallised pots and you will see them seperately . Or they keep one pot but somewhere there will be a figure as to how much is crystallised. Not all providers do it exactly the same way although the result is the same.

jamesd

That's right.

dunstonh

I have a small pension pot, this year like so many others, the profit has been tiny 

The last year has actually been very good unless you had home bias in your investments or were too low risk.

. I have just found out that I can "switch off" this advisor charge which I have been paying for 4 yrs although in the FA blur they do not recommend this(for obvious reasons). 

If the adviser is controlling the investment strategy then you will need to take that over.

I want to switch it off straight away. but not sure what to do.I have another 2 yrs before having an annuity which means I would save £400 on their fees. 

In which case, you are probably switching to cash and have no need for an investment strategy.

Nick9967

Hi all , i was under the same , wrong impression, it seams
is my calculation below about right ? based on 5% net growth, after fess and inflation
Starting at year 1 , pot starting point, table value goes back into Pot total ( i understand this maybe a second separate pot)
So without me worrying about income tax and personal allowance etc effectively this would give 18k tax free pa. is that what you're saying? or have i got this wrong again?
Thanks in advance  

5%	Start Pot	Tax Free	Taxable	2 Pots Total
1	£300,000	£18,000	£54,000	£282,000
2	£296,457	£18,000	£54,000	£278,457
3	£292,733	£18,000	£54,000	£274,733
4	£288,818	£18,000	£54,000	£270,818
5	£284,702	£18,000	£54,000	£266,702
6	£280,375	£18,000	£54,000	£262,375
7	£275,827	£18,000	£54,000	£257,827
8	£271,045	£18,000	£54,000	£253,045
9	£266,018	£18,000	£54,000	£248,018
10	£260,733	£18,000	£54,000	£242,733
11	£255,177	£18,000	£54,000	£237,177
12	£249,337	£18,000	£54,000	£231,337
13	£243,197	£18,000	£54,000	£225,197
14	£236,742	£18,000	£54,000	£218,742
15	£229,957	£18,000	£54,000	£211,957
16	£222,823	£18,000	£54,000	£204,823
17	£215,324	£18,000	£54,000	£197,324
18	£207,440	£18,000	£54,000	£189,440
19	£199,152	£18,000	£54,000	£181,152
20	£190,440	£18,000	£54,000	£172,440
21	£181,280	£18,000	£54,000	£163,280
22	£171,651	£18,000	£54,000	£153,651
23	£161,528	£18,000	£54,000	£143,528
24	£150,887	£18,000	£54,000	£132,887
25	£139,700	£18,000	£54,000	£121,700
26	£127,939	£18,000	£54,000	£109,939
27	£115,575	£18,000	£54,000	£97,575
28	£102,578	£18,000	£54,000	£84,578
29	£88,914	£18,000	£54,000	£70,914
30	£74,549	£18,000	£54,000	£56,549

Croeso69

Nick9967 said:

Hi all , i was under the same , wrong impression, it seams
is my calculation below about right ? based on 5% net growth, after fess and inflation
Starting at year 1 , pot starting point, table value goes back into Pot total ( i understand this maybe a second separate pot)
So without me worrying about income tax and personal allowance etc effectively this would give 18k tax free pa. is that what you're saying? or have i got this wrong again?
Thanks in advance  

5%	Start Pot	Tax Free	Taxable	2 Pots Total
1	£300,000	£18,000	£54,000	£282,000
2	£296,457	£18,000	£54,000	£278,457
3	£292,733	£18,000	£54,000	£274,733
4	£288,818	£18,000	£54,000	£270,818
5	£284,702	£18,000	£54,000	£266,702
6	£280,375	£18,000	£54,000	£262,375
7	£275,827	£18,000	£54,000	£257,827
8	£271,045	£18,000	£54,000	£253,045
9	£266,018	£18,000	£54,000	£248,018
10	£260,733	£18,000	£54,000	£242,733
11	£255,177	£18,000	£54,000	£237,177
12	£249,337	£18,000	£54,000	£231,337
13	£243,197	£18,000	£54,000	£225,197
14	£236,742	£18,000	£54,000	£218,742
15	£229,957	£18,000	£54,000	£211,957
16	£222,823	£18,000	£54,000	£204,823
17	£215,324	£18,000	£54,000	£197,324
18	£207,440	£18,000	£54,000	£189,440
19	£199,152	£18,000	£54,000	£181,152
20	£190,440	£18,000	£54,000	£172,440
21	£181,280	£18,000	£54,000	£163,280
22	£171,651	£18,000	£54,000	£153,651
23	£161,528	£18,000	£54,000	£143,528
24	£150,887	£18,000	£54,000	£132,887
25	£139,700	£18,000	£54,000	£121,700
26	£127,939	£18,000	£54,000	£109,939
27	£115,575	£18,000	£54,000	£97,575
28	£102,578	£18,000	£54,000	£84,578
29	£88,914	£18,000	£54,000	£70,914
30	£74,549	£18,000	£54,000	£56,549

Tax free cash stops after 5 years ...

Year	UnCrystallised	Crystallised	Tax Free	Taxable	UnCrystallised	Crystallised
1	300,000.00	0.00	18,000.00	54,000.00	239,400.00	56,700.00
2	239,400.00	56,700.00	18,000.00	54,000.00	175,770.00	116,235.00
3	175,770.00	116,235.00	18,000.00	54,000.00	108,958.50	178,746.75
4	108,958.50	178,746.75	18,000.00	54,000.00	38,806.43	244,384.09
5	38,806.43	244,384.09	9,701.61	29,104.82	0.00	287,163.35
6	0.00	287,163.35	0.00	0.00	0.00	301,521.52
TOTAL			81,701.61

manicmaggi

If I take my tax free 25% as a lump sum from my personal pension.

Could I take another amount in the same financial year without incurring tax (assuming that I do not earn/take more than that personal allowance in said year)

AlanP_2

manicmaggi said:

If I take my tax free 25% as a lump sum from my personal pension.

Could I take another amount in the same financial year without incurring tax (assuming that I do not earn/take more than that personal allowance in said year)

Yes, you can take as much taxable income as you want, the fact that it is below PA and no tax is payable makes no difference.

Remember though as soon as you take 1p of taxable income you are limited to £4k for future DC pension contributions. If still working might be an issue, if not working then probabaly not.

Nick9967

Thanks Croeso69, clear ive got it wrong on both counts then 
Based on yours my below must be correct then, a case of manipulating what you take to maximise the tax free 

Year	UnCrystallised	Crystallised	Tax Free	Taxable	UnCrystallised	Crystallised
1	300,000	0	12,000	36,000	264,600	37,800
2	264,600	37,800	12,000	36,000	227,430	77,490
3	227,430	77,490	12,000	36,000	188,402	119,165
4	188,402	119,165	12,000	36,000	147,422	162,923
5	147,422	162,923	12,000	36,000	104,393	208,869
6	104,393	208,869	12,000	36,000	59,212	257,112
7	59,212	257,112	12,000	36,000	11,773	307,768
8	11,773	307,768	3,000	9,000	-238	332,606
9	-238	332,606
TOTAL			87,000
Year	UnCrystallised	Crystallised	Tax Free	Taxable	UnCrystallised	Crystallised
1	300,000	0	9,000	27,000	277,200	28,350
2	277,200	28,350	9,000	27,000	253,260	58,118
3	253,260	58,118	9,000	27,000	228,123	89,373
4	228,123	89,373	9,000	27,000	201,729	122,192
5	201,729	122,192	9,000	27,000	174,016	156,652
6	174,016	156,652	9,000	27,000	144,916	192,834
7	144,916	192,834	9,000	27,000	114,362	230,826
8	114,362	230,826	9,000	27,000	82,280	270,717
9	82,280	270,717	9,000	27,000	48,594	312,603
10	48,594	312,603	9,000	27,000	13,224	356,583
11	13,224	356,583	3,000	9,000	1,285	383,862
TOTAL			93,000

Thrugelmir

Nick9967 said:

Hi all , i was under the same , wrong impression, it seams
is my calculation below about right ? based on 5% net growth, after fess and inflation

Where are intending to invest to generate a linear compound 5% return over 30 years after fees and inflation.  Overly simplistic.