Please could I have a Noddy guide to drawdown?

YellowCarBlueCar

Thanks for the explanation, I guessed that there was a reason but had no idea what it was!
I've still got at least 3 1/2 years before any if this becomes available to me, so will have a think about the ISA option. 

michaels

Malchester said:

I currently am accessing a small pot pension through UFPLS. Each month I take out the same amount of money of which 25% is tax free and the remaining 75% is taxable (although as I am not paying tax at the moment nothing is taken off). This pot is helping me with retirement income until I reach state retirement age and I can draw defined benefit pensions and state pension. As a non earner I can also add £2880 to the pot each tax year and, even though I am not paying tax, HMRC top the addition up with £720 to make a total of £3660. As I am not liable for tax at the moment this £720 top up is totally free money. However, not all pension providers have the option of UFPLS. Also note that if you take UFPLS it will trigger the MPAA whereby only a maximum of £4000 can be put into a pension each year.

Small pot in pension terminology doesn't just mean not very large but specifically refers to pension pots under 10k for which different rules can be applied - funnily enough this can be done with up to 3 small pots so in some circumstance sit can make sense to split a larger pension into 3 small pot pensions and and the remainder left in the current pension.....

Also worth mentioning the figure of about 16k per year which can be taken from a pension by taking a 25% lump sum and the crystallised 75% where this 75% is equal to the personal allowance and the lump sum is 33% on top.  This means all remaining funds are uncrystallised, ie still i the pot eligible for 35% tfls.  This can be slightly higher if one partner also transfers 10% of their personal allowance ('married' couples allowance)

Malchester

Malchester said:

CloesUnc said:

Malchester said:

I currently am accessing a small pot pension through UFPLS. Each month I take out the same amount of money of which 25% is tax free and the remaining 75% is taxable (although as I am not paying tax at the moment nothing is taken off). This pot is helping me with retirement income until I reach state retirement age and I can draw defined benefit pensions and state pension. As a non earner I can also add £2880 to the pot each tax year and, even though I am not paying tax, HMRC top the addition up with £720 to make a total of £3660. As I am not liable for tax at the moment this £720 top up is totally free money. However, not all pension providers have the option of UFPLS. Also note that if you take UFPLS it will trigger the MPAA whereby only a maximum of £4000 can be put into a pension each year.

Hi, OK thanks. Did you set up your UFPLS drawdowns as a kind of standing order with your provider, or do you have to do a manual request each month?

Thanks

No. I was with PensionBee and, despite them promising it would be introduced they never did and lately said they were not going to do it. I have been requesting a withdrawal each month but it was not too difficult, took about 6 or 7 dys from request to receipt. Transferred recently from PensionBee to Penfold who say they can do this but have only just received my first monthly withdrawal and will be checking with them on Monday about September's withdrawal.

Should also have said I looked at Vanguard (I have other investments with them) but, while they do UFPLS, they require an interview each time a withdrawal is made so I forgot them.

CloesUnc

Malchester said:

Malchester said:

CloesUnc said:

Malchester said:

I currently am accessing a small pot pension through UFPLS. Each month I take out the same amount of money of which 25% is tax free and the remaining 75% is taxable (although as I am not paying tax at the moment nothing is taken off). This pot is helping me with retirement income until I reach state retirement age and I can draw defined benefit pensions and state pension. As a non earner I can also add £2880 to the pot each tax year and, even though I am not paying tax, HMRC top the addition up with £720 to make a total of £3660. As I am not liable for tax at the moment this £720 top up is totally free money. However, not all pension providers have the option of UFPLS. Also note that if you take UFPLS it will trigger the MPAA whereby only a maximum of £4000 can be put into a pension each year.

Hi, OK thanks. Did you set up your UFPLS drawdowns as a kind of standing order with your provider, or do you have to do a manual request each month?

Thanks

No. I was with PensionBee and, despite them promising it would be introduced they never did and lately said they were not going to do it. I have been requesting a withdrawal each month but it was not too difficult, took about 6 or 7 dys from request to receipt. Transferred recently from PensionBee to Penfold who say they can do this but have only just received my first monthly withdrawal and will be checking with them on Monday about September's withdrawal.

Should also have said I looked at Vanguard (I have other investments with them) but, while they do UFPLS, they require an interview each time a withdrawal is made so I forgot them.

OMG, who on Earth would want to do that every month? So much for pension freedoms!

Albermarle

CloesUnc said:

Malchester said:

Malchester said:

CloesUnc said:

Malchester said:

I currently am accessing a small pot pension through UFPLS. Each month I take out the same amount of money of which 25% is tax free and the remaining 75% is taxable (although as I am not paying tax at the moment nothing is taken off). This pot is helping me with retirement income until I reach state retirement age and I can draw defined benefit pensions and state pension. As a non earner I can also add £2880 to the pot each tax year and, even though I am not paying tax, HMRC top the addition up with £720 to make a total of £3660. As I am not liable for tax at the moment this £720 top up is totally free money. However, not all pension providers have the option of UFPLS. Also note that if you take UFPLS it will trigger the MPAA whereby only a maximum of £4000 can be put into a pension each year.

Hi, OK thanks. Did you set up your UFPLS drawdowns as a kind of standing order with your provider, or do you have to do a manual request each month?

Thanks

No. I was with PensionBee and, despite them promising it would be introduced they never did and lately said they were not going to do it. I have been requesting a withdrawal each month but it was not too difficult, took about 6 or 7 dys from request to receipt. Transferred recently from PensionBee to Penfold who say they can do this but have only just received my first monthly withdrawal and will be checking with them on Monday about September's withdrawal.

Should also have said I looked at Vanguard (I have other investments with them) but, while they do UFPLS, they require an interview each time a withdrawal is made so I forgot them.

OMG, who on Earth would want to do that every month? So much for pension freedoms!

It is because UFPLS was really designed for people taking larger lump sums /cashing in their pensions. Plus for providers who did not have the software to handle flexible drawdown.As far as I know monthly UFPLS withdrawals are an issue for many providers.
I think the way around it is to have flexi access drawdown and ask the provider to make each monthly payment exactly 25% tax free and 75% taxable. Effectively the same end result.

dunstonh

sevenhills said:

Malchester said:

As a non earner I can also add £2880 to the pot each tax year and, even though I am not paying tax, HMRC top the addition up with £720 to make a total of £3660.

As this seems to be a thread for dummies, why do people state the tax relief is 20%?

If I put £4,000 into a SIPP, the added tax relief would be £1,000 which is 25% of £4,000

Are my sums correct?

You are not putting £4000 in a SIPP.  You are putting £5000 in a SIPP for which you get 20% relief on the contribution.

HMRC treat pension contributions as gross.   And historically, all providers would pre-fund tax relief.  So, the gross contribution was immediate.   Its only a recent trend with the DIY providers/platforms who do not pre-fund, where people have had to wait for the tax relief to be credited, that makes more people view it as a bonus rather than a relief.

dunstonh

CloesUnc said:

Malchester said:

Malchester said:

CloesUnc said:

Malchester said:

I currently am accessing a small pot pension through UFPLS. Each month I take out the same amount of money of which 25% is tax free and the remaining 75% is taxable (although as I am not paying tax at the moment nothing is taken off). This pot is helping me with retirement income until I reach state retirement age and I can draw defined benefit pensions and state pension. As a non earner I can also add £2880 to the pot each tax year and, even though I am not paying tax, HMRC top the addition up with £720 to make a total of £3660. As I am not liable for tax at the moment this £720 top up is totally free money. However, not all pension providers have the option of UFPLS. Also note that if you take UFPLS it will trigger the MPAA whereby only a maximum of £4000 can be put into a pension each year.

Hi, OK thanks. Did you set up your UFPLS drawdowns as a kind of standing order with your provider, or do you have to do a manual request each month?

Thanks

No. I was with PensionBee and, despite them promising it would be introduced they never did and lately said they were not going to do it. I have been requesting a withdrawal each month but it was not too difficult, took about 6 or 7 dys from request to receipt. Transferred recently from PensionBee to Penfold who say they can do this but have only just received my first monthly withdrawal and will be checking with them on Monday about September's withdrawal.

Should also have said I looked at Vanguard (I have other investments with them) but, while they do UFPLS, they require an interview each time a withdrawal is made so I forgot them.

OMG, who on Earth would want to do that every month? So much for pension freedoms!

who on Earth would want to do ad-hoc UFPLS every month?   
I suppose there may be someone but the vast majority either a regular monthly amount or yearly with a perhaps an occasional ad-hoc amount.

For those not taking advice, the provider has to go through the lines of defence to ensure the person understands what they are doing.    Advised cases actually have less work for the individual to do after the initial set-up as the adviser knows the client and doesn't need to repeat everything each time as long as its going to the plan.  If the person drifts from the plan, the adviser can give personalised advice and warnings.    Non-advised cant do that so you get the generic warnings and process each and every time.

Remember that drawdown is typically aimed at people with larger pension funds and other assets/wrappers.  The Government was concerned people with smaller posts would see it is a cashpoint machine and blow their money in no time.

Malthusian

CloesUnc said:

OMG, who on Earth would want to do that every month? So much for pension freedoms!

Choosing to use an inefficient provider that can't set up a simple regular monthly withdrawal of 25% tax free / 75% taxable and then complaining you're supposed to have "pension freedom" is no different from putting a ball gag on your own mouth and then complaining you're supposed to have mmmphhmpph of mmph (sorry, freedom of speech).

Malchester

Malthusian said:

CloesUnc said:

OMG, who on Earth would want to do that every month? So much for pension freedoms!

Choosing to use an inefficient provider that can't set up a simple regular monthly withdrawal of 25% tax free / 75% taxable and then complaining you're supposed to have "pension freedom" is no different from putting a ball gag on your own mouth and then complaining you're supposed to have mmmphhmpph of mmph (sorry, freedom of speech).

I agree. It does not take much to do this. I was with PensionBee who cannot (will not) do it even though before I went with them they told me they were going to do it. I have since transferred to Penfold and they are doing it without me having to request the withdrawal each month and without having to go through hoops to get the money

Ceme3000

Does anyone know if HL allow you to take a regular monthly 75% taxable / 25% tax free split?