Drawdown, annuity and tax

trickydicky14

Drawdown, annuity and tax.

Is tax deducted in the same way for both drawdown and annuity?

I’m aware in both situations a TFLS can be taken, and I’m aware in drawdown, you can take 25% up front and pay tax on the other 75% when taken, or you can take chunks of money as and when using the same ratio 25/75.

Does annuity work in the same way, I'm aware with an annuity you get a fixed amount with each payment for life but is it taxed in the same way?

zagfles

With annuities you'd usually take 25% TFLS up front and use the 75% to buy the annuity which would be taxable. I don't think any providers offer a "monthly UFPLS" equivalent ie 75% of each monthly payment is taxable and 25% tax free.

Of course you could still split the pot, eg a £200k pot, crystallise £100k taking £25k tax free and buying an annuity with £75k, and leave the other £100k uncrystallised and use that later to do the same (or different).

tacpot12

Hargreaves Landsdown and AJ Bell certainly provide a monthly UFPLS. I use AJ Bell and receive monthly UFPLS payments.

dunstonh

Is tax deducted in the same way for both drawdown and annuity?

Yes. In both cases, the 75% goes through payroll systems.

Albermarle

tacpot12 said:

Hargreaves Landsdown and AJ Bell certainly provide a monthly UFPLS. I use AJ Bell and receive monthly UFPLS payments.

Interesting as in some past threads, people claimed they could not find a retail pension/platform that would do it. Some insist on a compliance questionnaire with each UFPLS withdrawal.
Sounds like things have moved on, with some providers anyway.

zagfles

tacpot12 said:

Hargreaves Landsdown and AJ Bell certainly provide a monthly UFPLS. I use AJ Bell and receive monthly UFPLS payments.

I meant a "monthly UFPLS equivalent" for an annuity, as that was the OP asked about, ie an annuity where 25% of the monthly payment is tax free. That's not what you've got is it?? I know some providers offer it for drawdown, but not annuties??

Notepad_Phil

tacpot12 said:

Hargreaves Landsdown and AJ Bell certainly provide a monthly UFPLS. I use AJ Bell and receive monthly UFPLS payments.

Are you sure that HL offer a monthly UFPLS?

Mrs Notepad is with them and she's never noticed that option - she waits every four months or so and then goes through the UFPLS process to get those four months of payments. It's not the worst of processes to go through, but a one off setting up to get monthly UFPLS would be nice to have.

tacpot12

Notepad_Phil said:

tacpot12 said:

Hargreaves Landsdown and AJ Bell certainly provide a monthly UFPLS. I use AJ Bell and receive monthly UFPLS payments.

Are you sure that HL offer a monthly UFPLS?

Mrs Notepad is with them and she's never noticed that option - she waits every four months or so and then goes through the UFPLS process to get those four months of payments. It's not the worst of processes to go through, but a one off setting up to get monthly UFPLS would be nice to have.

Yes, I checked their website before posting, but I've looked back at my history so I could post the link where I found it,  and now I can't find it! I've re-Googled and can't see where HL confirm that any sort of regular withdrawal via UFPLS is allowed. Apologies, but I would call them to ask if it is possible. 

trickydicky14

zagfles said:

tacpot12 said:

Hargreaves Landsdown and AJ Bell certainly provide a monthly UFPLS. I use AJ Bell and receive monthly UFPLS payments.

I meant a "monthly UFPLS equivalent" for an annuity, as that was the OP asked about, ie an annuity where 25% of the monthly payment is tax free. That's not what you've got is it?? I know some providers offer it for drawdown, but not annuties??

Yes, that is what I was getting at, ‘can I choose not take 25% TFLS with an annuity and just get 25% tax free with each payment from the annuity’. If not, why would I go for an annuity without taking the 25% at the start, I know I would be offered a bigger pay out because the whole pot would be going into the annuity, but I would then be paying tax on the entire pot, or have I got this all wrong.

xylophone

I meant a "monthly UFPLS equivalent" for an annuity, as that was the OP asked about, ie an annuity where 25% of the monthly payment is tax free. That's not what you've got is it?? I know some providers offer it for drawdown, but not annuties??

I, too, am puzzled.

https://techzone.abrdn.com/public/pensions/Technical-Guide-Pensions-UFPLS#:~:text=annual allowance (MPAA)-,What is an UFPLS?,a series of lump sums.

What is an UFPLS?

Uncrystallised funds pension lump sums (UFPLS) are a way of taking pension benefits from money purchase pensions without going into drawdown or buying a lifetime annuity.

Under the UFPLS option, an individual can take their uncrystallised pension funds in one go, or as a series of lump sums.

It's also possible to combine UFPLS with other benefit options - for example, taking an UFPLS from part of the fund and using the remainder to buy a lifetime annuity to provide a guaranteed income.

Re taxation of annuity income.

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim75300

Linton

trickydicky14 said:

zagfles said:

tacpot12 said:

Hargreaves Landsdown and AJ Bell certainly provide a monthly UFPLS. I use AJ Bell and receive monthly UFPLS payments.

I meant a "monthly UFPLS equivalent" for an annuity, as that was the OP asked about, ie an annuity where 25% of the monthly payment is tax free. That's not what you've got is it?? I know some providers offer it for drawdown, but not annuties??

Yes, that is what I was getting at, ‘can I choose not take 25% TFLS with an annuity and just get 25% tax free with each payment from the annuity’. If not, why would I go for an annuity without taking the 25% at the start, I know I would be offered a bigger pay out because the whole pot would be going into the annuity, but I would then be paying tax on the entire pot, or have I got this all wrong.

No.  It is usual to take 25% tax free as cash and buy an annuity with the rest. Both annuities and drawdown are processed through a PAYE payroll system