SHORT FIXED TERM INCOME PLANS

Spivo46

I would like a short fixed term income plan for 2 to 3 years. I just want to de-risk what i have for that period while still creating some revenue. This works for me as it keeps me under my personal tax allowance. Having completed a quick internet search legal and general seem pretty good and also seem flexible. Looking to put £270k in and receive that lump sum back at the end of the term. works out around 6%. Any pointers please? Would an IFA get me better rates?
Also, i assume the lump sum returned at the end of the period is not taxed if it goes straight back into another pension product?

Marcon

Spivo46 said:

I would like a short fixed term income plan for 2 to 3 years. I just want to de-risk what i have for that period while still creating some revenue. This works for me as it keeps me under my personal tax allowance. Having completed a quick internet search legal and general seem pretty good and also seem flexible. Looking to put £270k in and receive that lump sum back at the end of the term. works out around 6%. Any pointers please? Would an IFA get me better rates?
Also, i assume the lump sum returned at the end of the period is not taxed if it goes straight back into another pension product?

You say 'another pension product' so not clear what this short term fixed income plan is? If it's some sort of pension, then you could be caught by recycling rules.

An IFA might well be able to get you better rates - and they might also be able to mop up any confusion in the process!

dunstonh

Also, i assume the lump sum returned at the end of the period is not taxed if it goes straight back into another pension product?

To remain tax free, it has to stay within the pension wrapper. It cannot leave the pension wrapper.

QrizB

Spivo46 said:

Also, i assume the lump sum returned at the end of the period is not taxed if it goes straight back into another pension product?

From other threads on similar subjects, I think the annuity is purchased from crystallised funds, the payments are taxable and the terminal lump sum is returned to a crystallised pot.

But I've only been a casual observer on those threads, so I could have that completely wrong.

Spivo46 said:

Any pointers please?

Check what happens if you die during the duration of the annuity. Another poster found that they wouldn't get the full lump sum out as a death benefit, but their initial investment less all payments made to date.
From memory, the average over-55 has a greater than 1% chance of dying in any given year, which isn't huge but is worth thinking about!

Spivo46

QrizB said:

Spivo46 said:

Also, i assume the lump sum returned at the end of the period is not taxed if it goes straight back into another pension product?

From other threads on similar subjects, I think the annuity is purchased from crystallised funds, the payments are taxable and the terminal lump sum is returned to a crystallised pot.

But I've only been a casual observer on those threads, so I could have that completely wrong.

Spivo46 said:

Any pointers please?

Check what happens if you die during the duration of the annuity. Another poster found that they wouldn't get the full lump sum out as a death benefit, but their initial investment less all payments made to date.
From memory, the average over-55 has a greater than 1% chance of dying in any given year, which isn't huge but is worth thinking about!

thanks - the quote i received is with guaranteed payments, both in term and the returned lump sum at the end of term

Spivo46

Marcon said:

Spivo46 said:

I would like a short fixed term income plan for 2 to 3 years. I just want to de-risk what i have for that period while still creating some revenue. This works for me as it keeps me under my personal tax allowance. Having completed a quick internet search legal and general seem pretty good and also seem flexible. Looking to put £270k in and receive that lump sum back at the end of the term. works out around 6%. Any pointers please? Would an IFA get me better rates?
Also, i assume the lump sum returned at the end of the period is not taxed if it goes straight back into another pension product?

You say 'another pension product' so not clear what this short term fixed income plan is? If it's some sort of pension, then you could be caught by recycling rules.

An IFA might well be able to get you better rates - and they might also be able to mop up any confusion in the process!

Thanks - The fixed term product is a pension product. Not convinced this is recycling as it is standard practice for anyone taking a fixed, short term annuity (payment plan).

Spivo46

dunstonh said:

Also, i assume the lump sum returned at the end of the period is not taxed if it goes straight back into another pension product?

To remain tax free, it has to stay within the pension wrapper. It cannot leave the pension wrapper.

dunstonh said:

Also, i assume the lump sum returned at the end of the period is not taxed if it goes straight back into another pension product?

To remain tax free, it has to stay within the pension wrapper. It cannot leave the pension wrapper.

thanks, i was hoping you would chip in! It seems to be standard practice. If you purchase such a product with a lump sum at the end of the term it appears that most people then choose again, if they go with a FAD or another annuity type product again. I therefore assume it stays in some type of tax wrapper (invested in a pension product). But you will know better than me?

BoxerfanUK

Having researched 'Fixed term annuities' (FTA) recently...... if you purchase an FTA with a crystallised pension pot then at the end of the term when you get the maturity lump sum back you can either...... buy another annuity..... take it all and pay tax on it...... or, open a SIPP with it and drawdown, paying tax at your marginal rate.  You can use UNcrystallised funds to buy an annuity but when you get the lump sum back at the end of the term the WHOLE AMOUNT is taxable, effectively losing your right to take 25% of your pot tax free!

Spivo46

BoxerfanUK said:

Having researched 'Fixed term annuities' (FTA) recently...... if you purchase an FTA with a crystallised pension pot then at the end of the term when you get the maturity lump sum back you can either...... buy another annuity..... take it all and pay tax on it...... or, open a SIPP with it and drawdown, paying tax at your marginal rate.  You can use UNcrystallised funds to buy an annuity but when you get the lump sum back at the end of the term the WHOLE AMOUNT is taxable, effectively losing your right to take 25% of your pot tax free!

Thanks Boxerfan - So, i would need to take the 25% TFLS first to ensure the annuity was set up with a crystallised fund. Have you made decision on the FTA option?