Unsure where to hold my survivors pension

OscardaPosca

I am due to inherit 25% of my father's pension (untouched and outwith of his estate). The pension pot is in the process of being split into individual pots for the 5 beneficiaries, all of which will become drawdown pensions. Currently the pension is held by a provider who only works with registered financial advisers. My father's FA is keen for me to keep my portion in the current set up (ie become a client of his), but the costs involved are very high (FA charges, platform fees, provider charges etc). I have always managed my own investments and hold a SIPP with another provider who tells me they can take the funds and put them within my current SIPP and distinguish between crystallised and non-crystallised funds. My father's FA tells me this is not how it should be handled and it needs to be completely separate for future tax reasons. Can anyone recommend a provider who is experienced in holding this type of survivors drawdown pension without exorbitant charges but access to a wide range of funds? Or do you think I should follow the FA's advice? Many thanks in advance!

dunstonh

 My father's FA tells me this is not how it should be handled and it needs to be completely separate for future tax reasons.

This is perhaps because it's an FA rather than an IFA.   FAs only really know their own provider and in-house product restrictions and limitations.    So, they tend to lack the knowledge that an IFA will have.  i.e. the FA will only see what their employer/linked provider does and will usually get brainwashed into thinking that is the norm or best way.     They won't know that others do it differently.

The FA is right and wrong at the same time.  Beneficiary drawdown needs to be kept separate from uncrystallised or crystallised funds, but providers and platforms do this in different ways.   Some will have a sub account for each segment and make it quite visible.  e.g. AB123456-001 for uncrystallised, AB123456-002 for crystallised and AB123456-003 for beneficiary drawdown.    Others will just put it into a single valuation but have a behind-the-scenes breakdown.  

Both methods are fine and work.  However, some people do have a preference for how they like it to appear on the front end of the software.  

Can anyone recommend a provider who is experienced in holding this type of survivors drawdown pension without exorbitant charges but access to a wide range of funds?

Pretty much every retail pension provider out there will be experienced.   Most whole of market platforms do not charge exorbitant amounts.

Or do you think I should follow the FA's advice?

As the advice is not fully correct and misleading, then no you shouldn't.   

OscardaPosca

Thank you @dunstonh, that's really helpful information.

Albermarle

 I have always managed my own investments and hold a SIPP with another provider who tells me they can take the funds and put them within my current SIPP and distinguish between crystallised and non-crystallised funds. 

Following Dunstonh comments, I suggest you recontact your current SIPP provider, to make sure that they understand that the beneficiary pension has to be kept separate, in one way or another.

Pat38493

dunstonh said:

Beneficiary drawdown needs to be kept separate from uncrystallised or crystallised funds, but providers and platforms do this in different ways.   

Just out of interest, why does it have to be kept separate?  Is pension fund amounts that you have inherited through probate treated different for tax?

dunstonh

Pat38493 said:

dunstonh said:

Beneficiary drawdown needs to be kept separate from uncrystallised or crystallised funds, but providers and platforms do this in different ways.   

Just out of interest, why does it have to be kept separate?  Is pension fund amounts that you have inherited through probate treated different for tax?

Uncrystallised and crystallised are still subject to the lifetime allowance.  Beneficiary drawdown is not.

OscardaPosca

Albermarle said:

 I have always managed my own investments and hold a SIPP with another provider who tells me they can take the funds and put them within my current SIPP and distinguish between crystallised and non-crystallised funds. 

Following Dunstonh comments, I suggest you recontact your current SIPP provider, to make sure that they understand that the beneficiary pension has to be kept separate, in one way or another.

Thank you! I have done this and they have confirmed that it will be kept separate albeit within my current SIPP wrapper. 

AlanP_2

dunstonh said:

Pat38493 said:

dunstonh said:

Beneficiary drawdown needs to be kept separate from uncrystallised or crystallised funds, but providers and platforms do this in different ways.   

Just out of interest, why does it have to be kept separate?  Is pension fund amounts that you have inherited through probate treated different for tax?

Uncrystallised and crystallised are still subject to the lifetime allowance.  Beneficiary drawdown is not.

Isn't there also the question of whether any withdrawals from the beneficiary drawdown pot are taxable or non-taxable relevant as well?

If the deceased was under 75 then it is tax free, if over then taxable at beneficiaries relevant tax rate when withdrawn as I understood it - but could have misunderstood what I read.

Marcon

AlanP_2 said:

dunstonh said:

Pat38493 said:

dunstonh said:

Beneficiary drawdown needs to be kept separate from uncrystallised or crystallised funds, but providers and platforms do this in different ways.   

Just out of interest, why does it have to be kept separate?  Is pension fund amounts that you have inherited through probate treated different for tax?

Uncrystallised and crystallised are still subject to the lifetime allowance.  Beneficiary drawdown is not.

Isn't there also the question of whether any withdrawals from the beneficiary drawdown pot are taxable or non-taxable relevant as well?

If the deceased was under 75 then it is tax free, if over then taxable at beneficiaries relevant tax rate when withdrawn as I understood it - but could have misunderstood what I read.

You understood it correctly. It needs to be kept separate (or rather, 'detailed separately') to ensure that if the deceased was under 75 at the time of death, those who inherit his/her pension fund aren't taxed on it.

Joey_Soap

Could I just ask a question please? Slightly off topic but very relevant.

It's clear from gov.uk guidelines that a DC pension pot inherited after April 2015 from an under 75 at time of death is tax free under most circumstances. I am in this exact situation.

For the first time in 2022/23, I will have to submit a self employment tax return.

I believe that I won't have to declare the regular but small drawdowns I am taking from the inherited DC pension pot? Does anyone know that's correct?

I am sure that under self assessment you only need to declare things that you know are taxable?

Clearly, I have self assessed and the inherited DC pension income is not taxable. But the self employment income definitely is and will be declared.

Thank you and apologies for high jacking this thread.

Pat38493

Joey_Soap said:

Could I just ask a question please? Slightly off topic but very relevant.

It's clear from gov.uk guidelines that a DC pension pot inherited after April 2015 from an under 75 at time of death is tax free under most circumstances. I am in this exact situation.

For the first time in 2022/23, I will have to submit a self employment tax return.

I believe that I won't have to declare the regular but small drawdowns I am taking from the inherited DC pension pot? Does anyone know that's correct?

I am sure that under self assessment you only need to declare things that you know are taxable?

Clearly, I have self assessed and the inherited DC pension income is not taxable. But the self employment income definitely is and will be declared.

Thank you and apologies for high jacking this thread.

I am not totally sure on this but I think that for other tax free items like first 30K of redundancy payments or taking out the tax free 25% of your pension pot, you simply don't mention it at all on your tax return, so I'm guessing it's the same for this and the pension company where you are drawing it from have to track it as if it's tax free money.  If you don't get a definitive answer here I guess you could contact HMRC or try the tax forum.