Drawdown, annuity and tax

sheslookinhot

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.

HL do not offer a monthly UFPLS drawdown.

squirrelpie

tacpot12 said:

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. 

It's new if they do, and the notion of regular payments (or regular anything other than review of your SIPP ) isn't mentioned in their UFPLS guide that I've just downloaded again so to be frank I don't believe it.

Albermarle

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.

In theory what you could do, is take the 25% TFLS and buy an annuity with that ( as well as by the normal route of using the remaining 75% to buy an annuity)
However buying an annuity with non taxable money is apparently rather unusual, and you will not get as good a rate as using the normal route. Also the income from it  will still be taxable, but at a lower rate than with a standard annuity. 
Probably would be better to invest the 25% tax free, and with a following wind you may be able to generate a decent income from it.

NedS

If regular monthly payments are what you want, then flexi-access drawdown is probably what you are looking for. If you don't want to crystallise the whole pot and take the full 25% TFLS in one go, just crystallise 1 years worth of cash at a time, take 25% up front tax free, and take the rest as regular monthly payments - rinse and repeat annually. I assume that type of arrangement is possible?

zagfles

NedS said:

If regular monthly payments are what you want, then flexi-access drawdown is probably what you are looking for. If you don't want to crystallise the whole pot and take the full 25% TFLS in one go, just crystallise 1 years worth of cash at a time, take 25% up front tax free, and take the rest as regular monthly payments - rinse and repeat annually. I assume that type of arrangement is possible?

The thread has become confused - OP wants (or at least was asking about) an annuity and whether that can be done in a similar way to drawdown, eg instead of 25% TFLS up front then the 75% used for an annuity - the whole 100% is used for an annuity but 25% of the monthly annuity payments are tax free.

I think the answer is no?

trickydicky14

zagfles said:

NedS said:

If regular monthly payments are what you want, then flexi-access drawdown is probably what you are looking for. If you don't want to crystallise the whole pot and take the full 25% TFLS in one go, just crystallise 1 years worth of cash at a time, take 25% up front tax free, and take the rest as regular monthly payments - rinse and repeat annually. I assume that type of arrangement is possible?

The thread has become confused - OP wants (or at least was asking about) an annuity and whether that can be done in a similar way to drawdown, eg instead of 25% TFLS up front then the 75% used for an annuity - the whole 100% is used for an annuity but 25% of the monthly annuity payments are tax free.

I think the answer is no?

Yes, that is what I was asking, thanks.

Secret2ndAccount

And Albermarle answered the question. You buy two annuities. The one you buy with the 75% will be taxable. The one you buy with the 25%, you will pay some tax (on the 'interest' if you will), but no tax on the gradual return of your 25% to you. If you took the 25% and put it in the bank, the interest would be taxable (you might or might not actually pay any tax). If you invested it, you might pay tax on the dividends, or CGT when you cashed in your profits. If you put it into an annuity, the gains are taxable; the return of your original 25% is not.
As also pointed out by Albermarle, there are less providers of these Purchased Life Annuities, so the market is not as competitive, and you might not get a great rate.

Dazed_and_C0nfused

I think this would be a Purchased Life Annuity and they aren't taxed under PAYE.

I think basic rate tax is deducted irrespective of the tax liability of the recipient.  So there could be settling up to to at the end of each tax year.

https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/purchase-life-annuity

zagfles

Secret2ndAccount said:

And Albermarle answered the question. You buy two annuities. The one you buy with the 75% will be taxable. The one you buy with the 25%, you will pay some tax (on the 'interest' if you will), but no tax on the gradual return of your 25% to you. If you took the 25% and put it in the bank, the interest would be taxable (you might or might not actually pay any tax). If you invested it, you might pay tax on the dividends, or CGT when you cashed in your profits. If you put it into an annuity, the gains are taxable; the return of your original 25% is not.
As also pointed out by Albermarle, there are less providers of these Purchased Life Annuities, so the market is not as competitive, and you might not get a great rate.

It's not really the same though, as you say a PLA is partly taxable, rates are worse and providers are fewer. I guess the rules don't allow the product the OP is after, though logically I don't see why they shouldn't...