Pension withdrawal question

rca779

So I am 58 years old, so I believe I can withdraw a fixed amount of up to 25% from my pension plans.

My question is can I withdraw cash amounts in stages?

I would like to withdraw between 20% from one of my pensions to fund a new car. If I do this, would I be able to withdraw the remaining 5% at a later date?

MallyGirl

rca779 said:

So I am 58 years old, so I believe I can withdraw a fixed amount of up to 25% from my pension plans.

My question is can I withdraw cash amounts in stages?

I would like to withdraw between 20% from one of my pensions to fund a new car. If I do this, would I be able to withdraw the remaining 5% at a later date?

It would be much simpler to crystallise the amount you need such that 25% of it gives you what you want. 

dunstonh

My question is can I withdraw cash amounts in stages?

Yes.

I would like to withdraw between 20% from one of my pensions to fund a new car. If I do this, would I be able to withdraw the remaining 5% at a later date?

Effectively, yes, but your wording doesn't reflect how it's done.

Assuming you are a taxpayer (if not, you would do it differently):
If you had £100k and wanted 20k tax free cash, then you would crystalise £80k of the pension.  25% of 80k is £20k.  The remaining £20k uncrystallised will continue to grow and you can take 25% of that at a later date.

You may find your pension doesn't support drawdown.  Lots of old ones do not.  So, you may need to transfer to a modern plan.   And remember that robbing your retirement years of money is generally not considered a good idea.  Especially if spent on consumer items that should be funded out of working life money.

rca779

Thanks for the replies. 
Apologies for my ignorance, but what do you mean by crystalise?

The pension fund I am looking at my withdrawal from is closed to new contributions and since I moved it to a Tech fund, I have seen huge performance. I have recently moved 60% of this to a safer, balanced fund.

My aim is to just take some of the profit I have seen over the last couple of years

AlanP_2

Crystallising is the technical term for making use of the tax free, 25%, portion.

In the above example the £80k referenced would be crystallised and the £29k tax free withdrawn 

Leaving £60k of crystallised funds to grow and £20k of uncrystalised funds from which a further 25% can be taken at a later date (subject to overall HMRC restrictions).

gm0

The thing you don't understand.  And which few do ahead of doing it.

The rules on tax free cash are that you can (but don't have to) take up to the TFC limit (which is 25% typically but exceptions to that exist for a few old schemes).  And this happens at the time a given "slice of pension" is first touched. 

The key point to understand is that the slice can be *part* of one of your pension(s).  Or all of a pension.

A further point is that not all schemes/admin do all things.  And it can sometimes be necessary to first transfer a DC pension to a new provider to be able to do what you want the way you want

The existing provider will not tell you this.  They are not allowed to advise you. And will talk exclusively about the options that they provide right now.  To say this is a tad unhelpful is an understatement. But it is where we are.

Key rule is that you only get one go at TFC for a given slice.  If you take a pension into payment and don't take all of it - then the opportunity to have it is gone - for that slice.  Take zero.  All marked for income. TFC lost.  Take 12.5%.  Half lost. (Money still there just marked for taxable income)

So basically nobody puts a pension into payment and takes 15% and comes back later to discover it is now taxable.

They just take a smaller "slice" for which the max 25% - is the same amount of money that they want to take.
The 75% of the slice is marked for income (if using FAD).  Or came with the TFC taxably (if using UFLPS). 
And leave the rest of the overall pension "untouched" (with its 25% intact).

There are two methods to access pensions in drawdown which support slicing.  UFPLS and Phased FAD.  Google them and read more on the forum.

NoMore

If this is the first time you've withdrawn form a pension, then you may find the pensionwise service useful. A free chat with them and they will go over all the options available to you w.r.t. how much tax free cash and how to take it. 

Pensions and retirement | Help with pensions and retirement | MoneyHelper

This is a government backed service, specifically set up to help people on their options with Pensions.

dunstonh

If this is the first time you've withdrawn form a pension, then you may find the pensionwise service useful. A free chat with them and they will go over all the options available to you w.r.t. how much tax free cash and how to take it. 

They don't go over all the options.  Just the main ones.  They are not good at combinations or alternative solutions.  For example, if the OP was a non-taxpayer they may need to do part UFPLS and part drawdown.  That wouldn't be covered.   Each individually may be but not combining the two.

The existing provider will not tell you this.  They are not allowed to advise you. And will talk exclusively about the options that they provide right now.  To say this is a tad unhelpful is an understatement. But it is where we are.

They are required to give all the main options now, even if they do not support them.  And, as we have seen on recent posts, this leads to people moaning about options that they cannot do with the existing plan