Pension Drawdon / HMRC.Advice please.

dunstonh

EraserOfLove said:

Ok. According to my telephone converstations with Aviva, the terms of my with-profits pension  policy which was taken out in 1991, i cannot take installments from my fund, i have to take the 25% in one go.  The rest remaining invested in an Aviva investor multi asset plus 1 fund. The other alternative is to transfer to anthoer pension provider who will allow me to take dawdown in installments. 

I will not be making any further withdrawals from this pension pot  until i am 65. I am currently 58 years old.

So, switch it to a pension that does offer the functionality and carry out the right transaction rather than the wrong one.  Or check you understood what "installments" actually meant.

However, what you have just described suggests Aviva are moving you to a different plan as carrying out the transaction on a legacy plan leaves you in the investment funds you are already in (unless you choose to change them).   The multi-asset plus fund suggests a new plan is being set up.

Most legacy Aviva plans don't offer regular drawdown options (i.e monthly "instalments"). They do allow ad-hoc lump sums (up to 6 a year) using UFPLS or tax free lump sum access.

EraserOfLove

dunstonh said:

EraserOfLove said:

Ok. According to my telephone converstations with Aviva, the terms of my with-profits pension  policy which was taken out in 1991, i cannot take installments from my fund, i have to take the 25% in one go.  The rest remaining invested in an Aviva investor multi asset plus 1 fund. The other alternative is to transfer to anthoer pension provider who will allow me to take dawdown in installments. 

I will not be making any further withdrawals from this pension pot  until i am 65. I am currently 58 years old.

So, switch it to a pension that does offer the functionality and carry out the right transaction rather than the wrong one.  Or check you understood what "installments" actually meant.

However, what you have just described suggests Aviva are moving you to a different plan as carrying out the transaction on a legacy plan leaves you in the investment funds you are already in (unless you choose to change them).   The multi-asset plus fund suggests a new plan is being set up.

Most legacy Aviva plans don't offer regular drawdown options (i.e monthly "instalments"). They do allow ad-hoc lump sums (up to 6 a year) using UFPLS or tax free lump sum access.

Understood.

Aviva are moving the remaining  75% of my pension fund to a new fund.  Aviva said that i have to move to a new fund, the afore mentioned  'Aviva investor multi asset plus 1 fund' .  I choose from 4 Aviva investment pathway options for the new fund. 

   i have chosen pathway option one.  which is similar to my current pension fund and i have no intention of drawing down any more funds until i'm 65.  its a mixed fund rated 3 out of a 7 risk rating.

https://www.aviva.co.uk/retirement/income-drawdown/investment-pathways-existing-customers/?cmp=otr-reo-income-drawdown-investment-pathways-existing-customers


https://www.fundslibrary.co.uk/fundslibrary.dataretrieval/documents.aspx/?user=LCWvgVM0c2qa0bAflnzlHJzMbOaGy/p/bdoq6lVeHow=&type=packet_lp_fund_unit_doc_factsheet&citicode=BO3W&r=1

Thanks Yet again for you help. appreciated. 
 

dunstonh

Aviva are moving the remaining  75% of my pension fund to a new fund.  Aviva said that i have to move to a new fund, the afore mentioned  'Aviva investor multi asset plus 1 fund' .  I choose from 4 Aviva investment pathway options for the new fund. 

So, effectively, you are moving to a new product.    Aviva's new products allow the UFPLS.

  i have chosen pathway option one.  which is similar to my current pension fund and i have no intention of drawing down any more funds until i'm 65.  its a mixed fund rated 3 out of a 7 risk rating.

Similar risk but a different type of fund.  What you have smoothed out the volatility.  What they are moving you to has no smoothing.  You will see full volatility going forward.   

From what you have said, you should be doing UFPLS (either fully for the amount needed or partially).    By taking the 25% only, you are increasing the amount of tax you will pay.  Not initially but with later draws.

EraserOfLove

Ok Understood.

I will bring up the topic of UFPLS with them again in my scheduled call with their drawdown team Wednesday Morning. The volatility aspect you mentioned has concerend me. Thanks again, i will certainly bring this issue up as well in my call with Aviva.  

dunstonh

EraserOfLove said:

Ok Understood.

I will bring up the topic of UFPLS with them again in my scheduled call with their drawdown team Wednesday Morning. The volatility aspect you mentioned has concerend me. Thanks again, i will certainly bring this issue up as well in my call with Aviva.  

I only mentioned the volatility because people who invested in With Profits funds were largely shielded from the peaks and troughs of market returns.   Plus, they tended to have less frequent statements (typically annually, where modern plans tend to be quarterly and with online valuations possible).            

If you went with a similar risk to the old With Profits fund then returns will be broadly similar except you won't get that smoothing effect and if you happen to look at the value during one of the sharper falls, you will see the full extent whereas before, you would not.

Its quite common for people to not realise the volatility that went on behind the scenes with these old plans as it was effectively hidden from them.   With modern plans and investments, you get to see it all and that can take some getting used to with some people.  Transparency can be a good thing but sometimes it can show you too much if you are not ready for it.

EraserOfLove

Fully understood. As you say,  i only get one Yearly statement, and have done so for the past 30 years.

I genuinely appreciate the value of your time and sound advice. It certainly gives me much food for thought. Your last sentence  raises the hair on the back of my neck somewhat. Very good advice which i will take on board. I'm a probation officer by trade so this fiscal arena is a steep learning curve for me. 

Albermarle

EraserOfLove said:

Fully understood. As you say,  i only get one Yearly statement, and have done so for the past 30 years.

I genuinely appreciate the value of your time and sound advice. It certainly gives me much food for thought. Your last sentence  raises the hair on the back of my neck somewhat. Very good advice which i will take on board. I'm a probation officer by trade so this fiscal arena is a steep learning curve for me. 

Try not to worry about it too much. The with profits funds did smooth out market movements, but at the expense of high charges and restricted long term growth. They are now seen as old fashioned and slowly fading away.

EraserOfLove

Albermarle said:

EraserOfLove said:

Fully understood. As you say,  i only get one Yearly statement, and have done so for the past 30 years.

I genuinely appreciate the value of your time and sound advice. It certainly gives me much food for thought. Your last sentence  raises the hair on the back of my neck somewhat. Very good advice which i will take on board. I'm a probation officer by trade so this fiscal arena is a steep learning curve for me. 

Try not to worry about it too much. The with profits funds did smooth out market movements, but at the expense of high charges and restricted long term growth. They are now seen as old fashioned and slowly fading away.

Thank you, thats good to know!. i've certainly had a few disturbed nights sleep  but  feel better for all the advice i've received today. i've managed to book a phone consultation with pension wise also.

It's a very  interesting subject and so far removed from my day to day role as a former probation officer. Thank you all.  this forum has proved to be a bit of a god send today. 

Albermarle

EraserOfLove said:

Albermarle said:

EraserOfLove said:

Fully understood. As you say,  i only get one Yearly statement, and have done so for the past 30 years.

I genuinely appreciate the value of your time and sound advice. It certainly gives me much food for thought. Your last sentence  raises the hair on the back of my neck somewhat. Very good advice which i will take on board. I'm a probation officer by trade so this fiscal arena is a steep learning curve for me. 

Try not to worry about it too much. The with profits funds did smooth out market movements, but at the expense of high charges and restricted long term growth. They are now seen as old fashioned and slowly fading away.

Thank you, thats good to know!. i've certainly had a few disturbed nights sleep  but  feel better for all the advice i've received today. i've managed to book a phone consultation with pension wise also.

It's a very  interesting subject and so far removed from my day to day role as a former probation officer. Thank you all.  this forum has proved to be a bit of a god send today. 

There is also a savings & investments forum. You might find this useful as well if you want to look more into this interesting subject of personal finance.

BoxerfanUK

I'm far from the expert compared to some of the regular posters on here, but If you have no other form of income you are not using up your annual personal tax allowance (£12,570 pa) so it would make more sense to use some of the 'taxable' element of your pension to use up your personal allowance, thus you would pay NO TAX on the 'taxable' element anyway as its within your personal tax allowance! 

It makes no sense if you have no other income to solely take the 25% tax free sum if all you are going to do is use that as your annual income!

The best time to utilize the 25% tax free part is when you have other income (say, state pension) which uses up most or all of your personal allowance.