UFPLS and Flexi Drawdown advices please

planforfuture

Thanks in advance for your help.

A few months ago, I have stopped working and stopped making contribution (defined contribution) to my employer pension provider. They have now provided me infomation regarding accessing my company pension when I am ready. There are usual option incl. Transfer, Drawdown, Cash+Drawdown and Cash.

Our initial thought is that we will utilise the UFPLS method to take out £16,760 p/a (assumming personal income tax allowance remains in the current rate)  from the pension pot until I reach the age of 67 in 5 years time where I will be receiving state pension then. And then from age 67, I will be reducing taking income from my pension pot for IHT purpose. Between now and age 67, I will also be taking incomes from selling stocks (from general investment accounts) to take advantage of the CGT.

My issue is when I spoke to the company pension provider regarding their UFPLS option, their definition of UFPLS basically is taking everything out in cash either in 1 or 2 payments with upto 25% tax free as lumpsum cash. This is not what I understand as UPFLS but this is their definition anyway hence I am looking to transfer my pension to another provider whi will provide the usual flexi drawdown and unlimited UFPLS option i.e. as previously mentioned taking out £16,760 per year and keep the remaining invested.

Questions
1) I also have another two smaller pension pots from previous contribution and I wonder if it's a good idea to combine them with the main pot into a single pension pot for easier management purpose?
2) Is my initial approach of taking £16,760 p/a still sound or should I consider a flexi drawdown method instead (understand that drawdown pension account has a different investment strategy as vs pension saving account?
3) Any recommendation for pension provider to meet my requirements (i.e. unlimited UFPLS and flexi drawdons) and with low management fees?

NedS

1) Yes, sounds like it would make sense to combine them, especially if you are having to move the main one anyway.

2) Yes, that is my understanding of UFPLS too, and exactly how I planned to take my DC pension. An advantage of flexi-access drawdown is that the whole pot can be crystallised at once giving you immediate access to the 25% TFLS, whilst keeping the remaining pot invested and available to draw down at your marginal tax rate. This is an option if you want the large TFLS, but in your case it sounds like you would prefer to keep it within the pension tax wrapper for IHT purposes.

3) Pension providers do not have to offer all options. I'm pretty sure most of the main SIPP providers offer most options (e.g, HL, Fidelity etc), and I'm sure others will be able to offer specific recommendations. Also keep an eye out as some providers offer cash back incentives if you transfer your pension to them which is worth considering if you are going to transfer anyway.

Also keep an eye out for fees - some charge for drawdown arrangements, others do not, so you will need to work out which overall fee arrangement works out best for you overall (e.g, HL have relatively high platform fees on investments, but no fees for drawdown etc)

planforfuture

Thanks for the reply. My current main pension provider charges an avg of 0.36% pa management fee - is it high, avg or low?

planforfuture

Sorry I mean 0.28% pa

dunstonh

There are usual option incl. Transfer, Drawdown, Cash+Drawdown and Cash.

The usual options nowadays are all drawdown options.   Yours appears not to have that.

My issue is when I spoke to the company pension provider regarding their UFPLS option, their definition of UFPLS basically is taking everything out in cash either in 1 or 2 payments with upto 25% tax free as lumpsum cash.

Some schemes do restrict the number of available UFPLS transactions.  

 This is not what I understand as UPFLS but this is their definition

UFPLS is the drawing of the full amount out split on a 75/25% basis (unless protected tax free cash).
Phased UFPLS is where you can draw partial amounts out multiple times on a 75/25% basis (unless protected tax free cash)

1) I also have another two smaller pension pots from previous contribution and I wonder if it's a good idea to combine them with the main pot into a single pension pot for easier management purpose?

Probably unless you are close to the LTA limit and these can be drawn under the small pots rule.  Or if they have safeguarded benefits.

2) Is my initial approach of taking £16,760 p/a still sound or should I consider a flexi drawdown method instead (understand that drawdown pension account has a different investment strategy as vs pension saving account?

If it meets your objectives then yes.  If it doesn't meet your objectives then no.

There is no reason why your investment strategy needs to differ but you may choose it to do so.

3) Any recommendation for pension provider to meet my requirements (i.e. unlimited UFPLS and flexi drawdons) and with low management fees?

Pretty much most modern whole of market pensions meet your requirements.  Restricted offerings are more likely to restrict on functionality too.

planforfuture

Wrt pension providers, are there non-SIPP i.e. i don't need an ISA friedly pension plan as I a likely used up my yearly ISA allowance already.

Linton

planforfuture said:

Wrt pension providers, are there non-SIPP i.e. the provider manage my pension fund for me instead of me tracking, selling and buying myself?

Which one is better managed or SIPP?

These days personal managed pensions are often run by IFAs or tied FAs who will charge a fee for the service.  The funds would be held in a SIPP to which the IFA would have access.

dunstonh

 i don't need an ISA friedly pension plan as I a likely used up my yearly ISA allowance already.

There is no such thing as an ISA friendly pension.  A pension is a tax wrapper. An ISA is a tax wrapper.  They do not integrate with each other.

However, yes, there are still a number of pensions that are not SIPPs.   There are still some stakeholder pensions, a number of personal pensions, many workplace pensions (of many different types of pension), robo-provider pensions etc

SIPPs have lower consumer protection and less regulatory and capital requirements for providers.  So, they are more popular in the cost focused DIY world.

planforfuture

OK. My question is I don't really want to actively managed my pension fund on a daily basis i.e. selling and buying differenet funds. Are there any pension providers (i.e. non-SIPP) and not using an IFA to manage them for me?

Albermarle

planforfuture said:

OK. My question is I don't really want to actively managed my pension fund on a daily basis i.e. selling and buying differenet funds. Are there any pension providers (i.e. non-SIPP) and not using an IFA to manage them for me?

No pension provider, SIPP or otherwise, will give you any free personal financial advice, or manage the pension for you for nothing.  However some will have financial advice arms, where you can pay for advice, like with an IFA.

Most posters on here who are managing their own pensions, are not buying and selling funds on a daily basis. IN some cases maybe only once a year.

(understand that drawdown pension account has a different investment strategy as vs pension saving account?
Not necessarily, often there can be no/little change. In any case with UFPLS and drawdown, you are still basically with drawing money from a pension each year. So normally the pension portfolio would be the same. 
There can be admin issues with frequent UFPLS withdrawals, so some people just make one withdrawal per year.

gm0

If for some reason (not sure of the motivation) you wish to avoid SIPP wrappers offered by the platforms.  You can transfer to a pension offered by life companies or pension companies - examples L&G or Aegon.  The platform costs at these companies are typically higher though. 

They offer some house "one and done" by risk level investment choices.  But you can find similar funds on the SIPPS.  Not that different.  That approach would not be that highly regarded here among the IFAs (obviously if that worked well - then why pay 0.5% pa extra for an IFA to do something else. Mediocre and suitable for the beginner kind of language. The DIY crowd who like choosing their own investment mix don't like them either because the platform isn't as cheap as it could be for the same investment.  And the flexibility (fund choice) often isn't there to build the desired DIY portfolio.

Phased FAD and proper UFPLS are largely interchangeable.  The cashflow you can generate with one can pretty much be done with the other.  If you particularly want phased UFPLS each year or more frequent for income tax convenience and to keep TFLS available and inside the pension then you do need to find a provider who does that version well and with minimalist admin.  Not what I do so can't suggest based on experience.

Another minor factor to consider is how the company handles asset sales to fulfill your income plan.  Behaviour varies.  Smearing across all, Cash fund first (until exhausted), Largest holding first etc.  If you are buffering (some) cash inside the pension as part of your drawdown plan to limit asset sales to rebalancing at 12-18 months then this behaviour matters (a bit). 
If you hold an asset mix and just want to nibble at it evenly over time then a simple sell in proportion outfit will do what you need although it would be wise to look at the trading costs of any scheme.

If you like you can pay a transactional fee only (not ongoing) for someone in the commodity transfer game to consolidate a few for you.  But it is not super difficult to do yourself.  A bit of electronic and sometimes paper and pdf form filling.  I did two earlier this year and while a bit frustrating as finance admin goes it was not actually difficult.  Regulated terminology is annoyingly obtuse so it's not that consumer friendly in terms of questions and tick boxes.

Just because you use a platform company offering a SIPP, ISA, GIA types of tax wrapper/accounts doesn't mean you have to make investments complicated. 

But it does pay to work out what you want to achieve before picking who to go with - simple single mullti-asset, whole of market passive, a relatively simple portfolio of a few funds researched online/books.   Particular active investments, or ethical or green or islamic or whatever it is for you. 

The companies all have their own investment ranges + cost structure and what is cheap for me (as an infrequent trader, who uses ETFs for one pension.  I am at Fidelity - this would not be as cheap a destination for a frequent trader or someone who spurns ETFs and only uses traditional funds.  Fidelity is cheaper for larger amounts (half price).  So 0.2% platform plus fund costs for funds.  Or £45 pa + ETF costs.  But Fidelity is not cheap for trades (vs others).

I have another pension at a life company with 0.06% platform and low cost funds so I am in practice wrapper agnostic - I use both life company and SIPP platform.  And ETFs and Funds.  One is 100% protected and cheap.  The other gives me more investment range to work with alongside.  And it's the assets that matter not the wrappers.  If you stray too far from UK (Ireland Luxembourg, USA) then you bring more tax rules and possible changes to them into your world.  Which is why I don't put all of my eggs in any one of these baskets (at a small cost in added complexity).

Marketing incentives are worth lookng out for where there is a sizeable transfer - the "cashback" can cover potential fees for quite a long way into the future.