2 Personal Pensions, drawdown on 1?

Sharkb0y

Hi, I'm 56 years old and have 2 personal pensions. One is 100k and the other is 65k (this one has a transfer out fee).

I've been thinking that I could use my 100k pot in flexible drawdown over the next few years until I reach state pension age and leave the 65k pension pot invested until that time, which hopefully should grow.

I guess I'm not sure how or if this works with tax and the 25% tax free sum? And if I can I drawdown £12,570 a year and not be liable for any tax?

I'm mortgage free, work part-time now and have savings so I see this more as a replacement wage so to speak. 

Dazed_and_C0nfused

Sharkb0y said:

Hi, I'm 56 years old and have 2 personal pensions. One is 100k and the other is 65k (this one has a transfer out fee).

I've been thinking that I could use my 100k pot in flexible drawdown over the next few years until I reach state pension age and leave the 65k pension pot invested until that time, which hopefully should grow.

I guess I'm not sure how or if this works with tax and the 25% tax free sum? And if I can I drawdown £12,570 a year and not be liable for any tax?

I'm mortgage free, work part-time now and have savings so I see this more as a replacement wage so to speak. 

Not if you're working part time no.

But if you stop work, haven't applied for Marriage Allowance and your only other taxable income is from interest or dividends then yes you could take £12,570 each year and pay no tax.

Or if you don't need to take the TFLS up front you could take £16,760 each year.

£4,190 would be tax free (lump sum) and £12,570 would be taxable but being within your Personal Allowance menas no tax would be owed on the pension.

xylophone

You can choose to access one or both of your pensions.

Each has its own  tax free pension commencement lump sum.

You could choose to take £25,000 tax free from your larger pot and leave the balance invested.

Or you could choose to take the PCLS and then draw down the balance as best suits you from the point of view of your tax situation.

The balance is taxable income but how much tax you would be due to pay would depend on what other taxable income you might have.

If none, then you could indeed set your Personal Allowance against this income and draw down £12,570 each year tax free.

Taking anything over the PCLS will trigger the MPAA. See

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/explore-your-pension-options

There are other ways to access the pension. Try here

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/explore-your-pension-options

Sharkb0y

Dazed_and_C0nfused said:

Sharkb0y said:

Hi, I'm 56 years old and have 2 personal pensions. One is 100k and the other is 65k (this one has a transfer out fee).

I've been thinking that I could use my 100k pot in flexible drawdown over the next few years until I reach state pension age and leave the 65k pension pot invested until that time, which hopefully should grow.

I guess I'm not sure how or if this works with tax and the 25% tax free sum? And if I can I drawdown £12,570 a year and not be liable for any tax?

I'm mortgage free, work part-time now and have savings so I see this more as a replacement wage so to speak. 

Not if you're working part time no.

But if you stop work, haven't applied for Marriage Allowance and your only other taxable income is from interest or dividends then yes you could take £12,570 each year and pay no tax.

Or if you don't need to take the TFLS up front you could take £16,760 each year.

£4,190 would be tax free (lump sum) and £12,570 would be taxable but being within your Personal Allowance menas no tax would be owed on the pension.

Thank you, that's helpful. I hadn't considered that last part about not taking the TFLS and you explained it well.

Albermarle

 and the other is 65k (this one has a transfer out fee).

A transfer out fee is unusual nowadays, are you sure your info is up to date and that it is just a standard DC pension ( just a pot of money with no attached benefits ) 

In any case some pension providers will pay any exit fees, if you transfer to them ( up to a limit)

Sharkb0y

Hi, yes it's clearly stated that there is the pension value and a transfer out value with several thousand pounds difference. It's an old pension I took out when I was a young man. 

The 2 pensions combined have admin charges at around £1500 per year, but the performance has been good up until the last year. I'm wondering whether consolidating them would save a bit on charges, but then risk not performing as well 🤔 plus the transfer charge.

Linton

Sharkb0y said:

Hi, yes it's clearly stated that there is the pension value and a transfer out value with several thousand pounds difference. It's an old pension I took out when I was a young man. 

The 2 pensions combined have admin charges at around £1500 per year, but the performance has been good up until the last year. I'm wondering whether consolidating them would save a bit on charges, but then risk not performing as well 🤔 plus the transfer charge.

It is possible that the difference may not be a transfer charge and that the pension may not be straightforward DC.  There were different options available 30 years ago which are not normal now.  For example is it tied to paying out at some fixed date and is there some sort of guarantee or bonus at maturity?  It could be worthwhile investigating the details.

Sharkb0y

Linton yes the smaller pension is set to pay out at 60 years old so guess it must be that. There are no other guarantees though.

I'm veering towards my first idea I think, lots of options.

Sharkb0y

I just checked my statement and there is a £4500 transfer admin charge! 

cloud_dog

Sharkb0y said:

I just checked my statement and there is a £4500 transfer admin charge! 

I think you need to provide more details, otherwise everyone is just second guessing potential situations, e.g. endowment fund, early termination fee, etc, etc.

Can you confirm who this scheme is with?

What is the actual name of the scheme, and what is the name of the investment?

RogerPensionGuy

Sharkb0y said:

I just checked my statement and there is a £4500 transfer admin charge! 

Is this 4.5K a fee from just the 65K pension? 

If yes, the charge looks big.