Still Take lump sum if not needed ?

Jet123

I am retired on state pension age 66, but have approximately 350K in a Sipp & d c pensions. I am currently looking at a 5 year fixed term annuity, but can't decide if to take tax free cash upfront as I have cash savings I could draw on if required .

Albermarle

AFAIK, it is not possible to buy an annuity with your pension pot without taking the tax free cash first ?
If you could it would probably not be a very good idea anyway.

You can take the tax free cash and reinvest it outside the pension, rather than save/spend it. It should be possible to invest in similar investments that you have in the pension, if that is what you wanted to do.

dunstonh

AFAIK, it is not possible to buy an annuity with your pension pot without taking the tax free cash first ?

It is but in circa 90% of cases you shouldn't do it.   Pretty much the only scenarios where it can be viable to do it are with high GARs.

 but can't decide if to take tax free cash upfront as I have cash savings I could draw on if required .

You are going to have a number of capital expenditure items in your lifetime.   If you are on oil or gas, then changing away from those isn't going to be cheap.  Especially if your house needs modifications (some people are going to spend in excess of £100k just to be able to put a heat pump in).  There will be cars, holidays etc.

If you dont need cash in the short term, then reinvest it back into a pension (and S&S ISA) every year.   

calcotti

You might want to look through this
https://forums.moneysavingexpert.com/discussion/6411130/ok-not-to-take-lump-sum#latest

phynix_uk

If you don't need the TFC then why take it? The pension sits outside of your estate from an inheritance tax perspective and grows free from tax. Taking it out only to reinvest into an ISA is not tax efficient as the ISA still sits inside your estate.

Have you considered drawdown instead? You could draw a combination of income and/or tax free cash to support your expenditure leaving the remaining funds invested at a risk appropriate to your personal attitude/comfort. 

Albermarle

If you don't need the TFC then why take it? The pension sits outside of your estate from an inheritance tax perspective and grows free from tax. Taking it out only to reinvest into an ISA is not tax efficient as the ISA still sits inside your estate

The OP stated they want to buy an annuity, so the scenario about TFC and inheritance tax, is different than with drawdown.

Jet123

I've made some bad fund choices in my Sipp, so at least with an annuity the income is fixed 

eskbanker

Jet123 said:

I've made some bad fund choices in my Sipp, so at least with an annuity the income is fixed 

But isn't that a false dichotomy, if you're omitting the third option of better investment choices within the SIPP?!