Protected Tax free sum

arty688

Hello,

I've been trying to sort my pensions out and it seems one of them had a protected tax free sum, hopefully a simple question .

is this protected tax free sum part of my 25% I can take out tax free or is it on top of ?

Know pensions there probably isn't a simple answer

Cheers

dunstonh

Protected tax-free cash relief means you are not limited to 25%.  It is not in addition to the 25%.   So, if its worked out that your protected tax free cash equates to say 37.8% then 37.8% is what you have available.   

if the protected tax free cash equates to say just 15% then you get the higher of the protected tax free cash or 25%.

arty688

cheers , in this case its £25k on a pot of £75K so good news.

Albermarle

Be aware that if you ever transferred this pension you would lose this protected tax free and just get the standard 25%.

Troytempest

Mrs Tempest has just taken 20k out of a pot of 28k as a protected tax free amount - was a very nice surprise.

arty688

Thought of another question probably stupid.

So ATM the tax free lump sum is 33% what happens if I put more money in ?

dunstonh

Albermarle said:

Be aware that if you ever transferred this pension you would lose this protected tax free and just get the standard 25%.

Although bulk transfers retain the protection.    Useful if you know someone else in the scheme who also wants to transfer out.

So ATM the tax free lump sum is 33% what happens if I put more money in ?

The pension is internally segmented to pre A day (April 2006) and post A day benefits. i.e. the value obtained from contributions made either side of the rule change.   The pre A day fund gets the higher tax free cash rate applied to it.   The post A day fund gets 25% applied to.     

The 33% is likely to be the average of the pre A day and post A day benefits as it currently stands.  Not the actual amount of TFC that applies to the pre A day benefits. 

arty688

Cheers , its and old scheme I'll just leave it alone until I'm 60 I think along with my other 5 pots , there doesn't seem to be a lot gained from trying to tidy them up  into less pots.

Mick_Clarke

I have a protected tax free pension and am retiring, rather than take annuity, I am looking to put into drawdown, I was told that I could inform drawdown provider to tell pension provider to pay enhanced amount and then transfer rest to drawdown. Drawdown provider says that I have to employ an advisor to enable a drawdown to be set up to maintain enhanced tax free. Pension provider states that they can pay enhanced amount to me and transfer rest to drawdown.
Provider and Drawdown company are different departments of the same company.
Please make sense of this for me.
I have registered a complaint at the confusion.

dunstonh

  Drawdown provider says that I have to employ an advisor to enable a drawdown to be set up to maintain enhanced tax free.

If your chosen provider only retails via an intermediary then that is correct.

If your chosen provider doesn't retail via an intermediary then it is incorrect.

Unless there are safeguarded benefits, such as a GAR.  If there are, then an adviser will be required if the fund is valued over £30k.

Provider and Drawdown company are different departments of the same company.

It doesn't make too much of a difference as a new plan is a new plan regardless of whom the provider is.   It can have clerical implications though.  For example, Aviva Life & pensions is different company to Aviva wrap.  All modern business goes on the Aviva wrap platform.  (and that ignores all the historic Aviva policies that used to be under AXA or Friends Provident, amongst many others).   They even use the external Origo transfer systems to transfer money between them.

So, don't get too hung up on logo in the corner. 

Please make sense of this for me.
I have registered a complaint at the confusion.

What is your complaint?  What are you confused about?

Edit, the poster has now created his own thread:

https://forums.moneysavingexpert.com/discussion/6302344/pension-ludicrousy#latest

gm0

Mick.  You are lucky if you can in the end take the enhanced TFC in source scheme, crystallising the remainder but then transfer this residue afterwards to a drawdown platform and then take taxable income from it in Flexible Access Drawdown rather than just being limited to the access methods of your old scheme. Some old schemes basically say TFC here = annuity or whole fund UFPLS for the lot.  And they thereby push you to transfer away (losing any enhanced % TFC with the individual transfer to another provider) onto the standard terms offered today.  Unless you do what dunstonh suggests upthread.

Some providers will support enhanced TFC and some (many?) walk up DIY ones - won't.  You may become entangled in the fact that a platform which does support it also prefers advised business to retail DIY channel business and is setup to support that audience.  And if they don't do DIY then off to the IFA you go to be able to use them. 
Sorry I don't know which DIY unadvised platform supports enhanced TFC as not a question I asked.

To understand what's happening also look at it from the provider end.  If you setup a "low cost" drawdown DIY SIPP platform competing on low fees then you want standard terms to current legislation for all new customers joining and as little complexity as possible. You certainly don't want to import OLD complexity for a few customers each from a thousand different old employer schemes each with a subtley different set of rules for TFC or whatever else it is.  So the offer is constrained and you bring the cash transfer. Onto those standardised terms such as 25%  TFC.  Or you don't bring it and keep your enhanced benefit (and limited access methods) in the scheme you are already in.  Perfectly sound product design from their point of view

The fact some outsourced pensions admin and new platforms both exist in the same corporate brands is fairly irrelevant. Should they do a better job on comms - sure thing.  But it's still not clear why the new SIPP business would invest in learning about historic schemes which are spending a few years being administered elsewehere in the life company before moving on again to another operator the next time the admin is relet by the scheme trustees. 
A few operators who aren't racing to the bottom on fees do support enhanced tfc and other things as dunstonh outlines above.  And complexity may arrive via bulk transfer as discussed above.

Based on the above - an admin team operating an old occupational trust and a drawdown platform support team may well have different views on what rules apply to the processes they support (and don't support) because that is both true and a deliberate policy.  Some rules (features for you) come from legislation, some from the trust deed, some from the regulator and some are the policies of the company offering a product or what the trustees elected to pay for.

The insistance on advice is likely a red herring.  As I understand it from past discussion on the forum enhanced TFC % alone should *not* trigger the forced advice requirement. But they likely have a rule for their helpdesk to say that protected rights = advice which is correct more often than it isn't (and the safer thing to say).  So either their policy is indeed always advice. Or your complaint will get a change in posture from them once a specialist looks at it and an apology that the helpdesk gave you the wrong information on this occasion.