Pension drawdown advice

RoadToRiches

Dazed_and_C0nfused said:

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.

What is the significance of £3,770 TFLS please? Can you not take what you like from your 25% tax free pot?

Dazed_and_C0nfused

You don't really have a 25% tax free pot though.

To get tax free money you have to crystallise some or all of the pension.

So to take 25% upfront means you are crystallising the whole lot so the remaining 75% is always taxable income.  That 75% might be say £40k on the day you crystallise but if that grows go £50k the whole £50k is taxable, there is no more TFLS available.

Whereas if you only crystallise £15,080 then you get £3,770 TFLS (25% of £15,080) and £11,310 taxable income.  And the rest of your pot can continue to grow and still allow allow 25% TFLS from the un-crystallised part.

Or you might go with £16,760 (£4,190 TFLS and £12,570 taxable income).

Other options are available, TFLS upfront or part of each withdrawal are just two that are often referred to.

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/drawdown/

mmunro2013

I hear 'Vanguard' are a good Drawdown pension provider any comments?

zagfles

mmunro2013 said:

I hear 'Vanguard' are a good Drawdown pension provider any comments?

They're quite cheap but you're restricted to Vanguard funds.

MK62

ss2020jd said:

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. 

What is your tax position......because it might be worth you effectively giving him 10% of your personal allowance (Marriage Allowance)......he could then take up to £18436 tax free using an option called UFPLS, which many drawdown providers offer these days.
The first 25% of an UFPLS withdrawal is tax free.......the rest is taxable, but if "the rest" is below his personal allowance, there is no tax to pay (well OK, there is upfront, but then he can claim it all back using HMRC form P55)

ss2020jd

MK62 said:

ss2020jd said:

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. 

What is your tax position......because it might be worth you effectively giving him 10% of your personal allowance (Marriage Allowance)......he could then take up to £18436 tax free using an option called UFPLS, which many drawdown providers offer these days.
The first 25% of an UFPLS withdrawal is tax free.......the rest is taxable, but if "the rest" is below his personal allowance, there is no tax to pay (well OK, there is upfront, but then he can claim it all back using HMRC form P55)

Thank you for this. I was not aware of that option. That sounds feasible. We are currently have no income and living on some savings so not being taxed. 

MK62

If you have no income and are planning to withdraw from just your husband's pension, then applying for the above is worthwhile whichever withdrawal option he uses tbh.....as a couple, it could save you up to £251.40 pa in income tax....not a king's ransom granted, but still very worthwhile.

ss2020jd

MK62 said:

If you have no income and are planning to withdraw from just your husband's pension, then applying for the above is worthwhile whichever withdrawal option he uses tbh.....as a couple, it could save you up to £251.40 pa in income tax....not a king's ransom granted, but still very worthwhile.

Yes, definitely. Very worthwhile. Thank you for that.