Pension drawdown advice

ss2020jd

Hi I have read through a few threads and articles to try to get an understanding but of course every situation is different so I thought it was time to ask directly. 

While my husband waits to get his appointment with the pension wise adviser we would be very grateful for your experience and knowledge to help us with any explanations on options regarding pension drawdowns and the difference between taking a regular amount or lump sum, and leaving the rest invested. 

My husband has no income now since 2020. He has a private pension for all his working life which he has not touched as yet. He is approaching 57. Can he draw down the full annual tax free amount for the current year if he starts the process to draw down soon (potentially Sep 2021-March 2022) and then from the next tax year April 2022 onwards adjust the amount to spread the tax free allowance draw down sum more equally over a 12 month period? Will this affect any other aspect of the pension or is there an alternative way that is preferable. 

Any opinions or experience welcome. Thank you in advance. 

Dazed_and_C0nfused

Yes he can take a taxable amount if he wishes (either £12,570 or £11,310 depending on what his Personal Allowance is).

But by doing so he will forever be limited to contributing £4,000 (gross) per tax year.

Does he intend to take 25% TFLS all in one go or a bit each time he takes a taxable withdrawal?

Have you checked his provider supports drawdown?

Thrugelmir

Have you tried this 

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/explore-your-pension-options

ss2020jd

Thank you for this @Dazed_and_confused - very helpful. I am not sure he was aware of that limit. 

He hadn’t decided about the TFLS as was unclear about the options and their implications. Apparently he has to sign off on an advisor for the pension provider before he can get a the full picture on options but yes they do support drawdown. 

 

ss2020jd

Thrugelmir said:

Have you tried this 

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/explore-your-pension-options

No we haven’t but that looks just like what we need. Thank you for that.

Dazed_and_C0nfused

This is worth a read.

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/money-purchase-annual-allowance-mpaa/

As far as the TFLS goes the usual thinking is not to take this if it isn't really needed.

By not taking it upfront it leaves more money invested and, hopefully, growing and enable a larger regular income with no tax to pay.

For example instead of taking say £11,310* in the current tax year and next tax year he could take £15,080.  £3,770 being TFLS and £11,310 taxable income which is covered by his Personal Allowance.

Obviously there's a lot more to think about, like will his pot support that level of withdrawl?

Also, he should check his State Pension forecast on gov.uk and make sure he reads the whole forecast, not just the headline figure.  If he needs to add more years to reach £179.60 then that is usually a brilliant investment choice.

*assumption he has applied for Marriage Allowance.

ss2020jd

Dazed_and_C0nfused said:

This is worth a read.

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/money-purchase-annual-allowance-mpaa/

As far as the TFLS goes the usual thinking is not to take this if it isn't really needed.

By not taking it upfront it leaves more money invested and, hopefully, growing and enable a larger regular income with no tax to pay.

For example instead of taking say £11,310* in the current tax year and next tax year he could take £15,080.  £3,770 being TFLS and £11,310 taxable income which is covered by his Personal Allowance.

Obviously there's a lot more to think about, like will his pot support that level of withdrawl?

Also, he should check his State Pension forecast on gov.uk and make sure he reads the whole forecast, not just the headline figure.  If he needs to add more years to reach £179.60 then that is usually a brilliant investment choice.

*assumption he has applied for Marriage Allowance.

Thanks so much - this is really helpful too. Definitely a lot to think about and a lot to try to understand. 

tigerspill

My OH seems to be in a similar situation. She is 55 and has been putting a lot into an HL Cash SIPP.  She has virtually no income this tax year as as he has retired.
She has already withdrawn the 25% TFLS.  And will draw the £12500 less a small bit of income tax free later in the year when we know her exact income.
She will then continue to put in £2880 (grossed to £3600) each year from here on, withdrawing 25% each time tax free, plus whatever remains of her tax free allowance until she hits zero in 4 more tax years. 

So basically a plan to withdraw all of this SIPP tax free before starting her DB pension at 60 - utilising maximum TFLS, and tax free allowances.

Albermarle

ss2020jd said:

Thank you for this @Dazed_and_confused - very helpful. I am not sure he was aware of that limit. 

He hadn’t decided about the TFLS as was unclear about the options and their implications. Apparently he has to sign off on an advisor for the pension provider before he can get a the full picture on options but yes they do support drawdown. 

 

It is not legally necessary to have an advisor involved to begin drawdown with a DC pension.  . I am assuming the particular pension provider involved is one that only works via advisors and not direct with the public (  maybe he has  access to the website and account info, but they will not take any actions unless it comes via an advisor)
If the pension has no guaranteed benefits , then it can be easily transferred to another provider, if he prefers not to have ( and pay) an advisor.
If you could name the pension provider it would help to be more certain on this point.

ss2020jd

Albermarle said:

ss2020jd said:

Thank you for this @Dazed_and_confused - very helpful. I am not sure he was aware of that limit. 

He hadn’t decided about the TFLS as was unclear about the options and their implications. Apparently he has to sign off on an advisor for the pension provider before he can get a the full picture on options but yes they do support drawdown. 

 

It is not legally necessary to have an advisor involved to begin drawdown with a DC pension.  . I am assuming the particular pension provider involved is one that only works via advisors and not direct with the public (  maybe he has  access to the website and account info, but they will not take any actions unless it comes via an advisor)
If the pension has no guaranteed benefits , then it can be easily transferred to another provider, if he prefers not to have ( and pay) an advisor.
If you could name the pension provider it would help to be more certain on this point.

Thanks I will pass that on and try to ascertain if that’s the case. It does sound like it must be so that is good to know.

Since he was reluctant for me to ask on a public forum (but did relent eventually) I don’t think he’ll take kindly to me giving any more details! Although he may change his mind when he’s had time to take in all the helpful responses received. 

dunstonh

He hadn’t decided about the TFLS as was unclear about the options and their implications. Apparently he has to sign off on an advisor for the pension provider before he can get a the full picture on options but yes they do support drawdown. 

That would indicate there are safeguarded benefits.   An adviser is not necessary unless there is.  Although an adviser can be a valuable option to consider.  In my experience, what the person thinks they are going to do is nearly always different to what they end up doing after advice as they are not aware of all the options.  Pensionwise do not go through all the options and only discuss things generically.  They do not give advice.