Taking 25% taxfree cash lumpsum out of large DC pension pot

BlisteringBarnacles

Just wanted to update : the transfer was super fast !

Initiated on on Fri 27th Sep from Aegon to Interactive Investor (200K) in the morning and from Aegon to Hargreaves Lansdown (300K) in the late afternoon .

All completed on Thu 3 Oct morning ! Vow ! Mighty impressed !

This was uncrystallized pension in cash. They all use electronic (Origo). All this possibly contributed to the super quick transfer.

Thanks.

Albermarle

BlisteringBarnacles said:

Just wanted to update : the transfer was super fast !

Initiated on on Fri 27th Sep from Aegon to Interactive Investor (200K) in the morning and from Aegon to Hargreaves Lansdown (300K) in the late afternoon .

All completed on Thu 3 Oct morning ! Vow ! Mighty impressed !

This was uncrystallized pension in cash. They all use electronic (Origo). All this possibly contributed to the super quick transfer.

Thanks.

One of mine completed in less than 36 hours !

BlisteringBarnacles

Had a bit of a scare today.

The (uncrystallized) funds had moved from Aegon to HL & I.I last Thu 03 Oct. I ended up with approx 300K in HL, 300K in II and 400 in Aegon and some change. Total about a million and 10 grand or so.

I had a bit of analysis paralysis about whether to pull the tax free cash lumpsum or not hence delayed by few days. Spoke to II last Friday and walked thru the steps. Seemed simple enough when the customer service rep walked me thru it so I thought I would do it this week.

The providers keep asking repeatedly if I have taken professional advice so I set up a PensionWise web chat today, spoke to a government agent and completed that formality. She did not say anything new over and above the discussions on this forum and similar forums. But I got that out of the way.

In the last couple of days there has been lot of speculation in the media that the 25% tax free cash lumpsum might be reduced to £100,000. Concerned, I called up Hargreaves.

HL rep said "today is the last day". I panicked and asked "last day for what ?" - They said if I wanted to do the crystallization and take tax-free lumpsum before Oct 30 budget, then today is the last day they will take applications. I guess there is a bit of a rush. I thanked her and went thru the online application. Pretty sure I did it correctly : 25% tax free cash lumpsum will be taken out and go into my HL taxable GIA (General Investment Account), rest goes into a "drawdown" account and my SIPP gets closed out to zero. But HL did not give me a reference number or email or secure message or anything to track the application. I just have a screenshot of the last page where it says Application Complete.

Spoke to I.I today and they did not say anything about today being the last day. But I am going to do it tomorrow. Cant afford to risk waiting. With Aegon the appoinment is on 23 Oct because that is the earliest they could get me an appointment with "Aegon Assist" associate. Going to see if I can bring it forward.

During the HL application today, at one point the HL form asked whether the sum total of my pension pots (HL and non HL) exceeds 1 million. I asked the associate what that was about. She said if it is more than 1 million, then they cannot do my crystallization online and I have to do it in paper. But my HL pension is only 300K. What the hell ? I then lied that all my pension pot total is less than 1 million. Will I get into any trouble due to this ? Will II and Aegon also ask the same question ? Since the amount in each provider is 300-400K, nobody knows my total exceeds 1 million unless I tell them. Even Aegon does not know. I had 900 with Aegon and I moved 300 to HL and 200 to II. I already had 100 with II - moved from Standard Life). Will they talk to each other and figure out that my total exceeds 1 million ?

Where is this limit of 1 million coming from anyway ? If anything I thought the limit was the old LTA of 1.073 million from a tax standpoint. Should I crystallize a total amount just less than 1 million to be safe ? If they force me to do paper form I don't have time.

On another note, if I crystallize all my 3 pots and take out the cash lumpsum of 254,000 or so there are certainly no tax consequences. But since it is 3 different pots and some people may (inadvertently) take out more than 268K, how do the govt or provider check that one is not exceeding 268K in total ? Or, is the onus on me to prove with screenshots and statements that I am not exceeding 268K ?

Thanks

JoeCrystal

Wow, talk about tail wagging the dog... 

BlisteringBarnacles, while you are technically correct that the Lifetime Allowance was abolished. You will be aware that two new allowances were introduced: the Lump Sum Allowance and the Lump Sum and Death Benefit Allowance.  So yes, the pension providers will ask you to double-check that you are permitted to take out the lump sum. After all, if you take any historical lump sum or lump sum from other pension schemes, your Allowance will be reduced accordingly. If you go over that, any lump sum benefits over your available allowance must be taxed at your marginal rate. No doubt you will be aware of these allowances naturally as this information is clearly outlined on websites and so on. The £1 million mark is likely a way to capture the people who are potentially close to or already beaching these allowances due to their historical lump sum withdrawals. 

As for how the government or provider checks, there is something called truth; you know, they ask questions, and you answer them thoroughly.  So, by lying, you are not allowing the pension providers to perform their legal duties and collect taxes properly. It is unbelievably foolish, but you must be really desperate and out of your mind at the time. If I remember correctly, you may be liable for a maximum penalty of £3,000 if you fraudulently or negligently make a false statement if it causes the scheme to make an unauthorised payment or get relief from tax chargeable.
There is another penalty if your lump sum allowance, lump sum death benefit allowance or maximum pension commencement lump sum would be greater than it actually is.

But your research will show you all this, and you are fully aware of these facts at the time anyway. I hope that you are caught out. We have enough trouble with tax avoidance and evasion in this country. 

BlisteringBarnacles

I am sorry, but I dont follow why you are accusing me of tax evasion. I am well below the 1.07 million mark, and upto 25% of that is tax free. Did it get reduced to 1 million overnight ?

HL seems to have what seems like a bureucratic process where, if the moment exceeds 1 million by a penny they want to do everything on paper and not online. If I want to make it by Oct 30, I will not have time to do it in paper hence my desperation.

I had no intention to indulge in tax evasion which I understand is a crime. I am disappointed that you accuse me of that. But anyway you are entited to your opinion. So I will leave it at that.

MallyGirl

Just guessing here that 1m is so close to the 1.07 m point that a change in fund values could easily push you over the line by the time action is taken so they have introduced some wiggle room.

ColdIron

Nevertheless you have made a fraudulent declaration, you have misrepresented your affairs. As you say, you lied. There may be consequences

BlisteringBarnacles

MallyGirl said:

Just guessing here that 1m is so close to the 1.07 m point that a change in fund values could easily push you over the line by the time action is taken so they have introduced some wiggle room.

The funds are all in cash. And no, still quite a bit of room to reach 1.07.

Thanks.

BlisteringBarnacles

ColdIron said:

Nevertheless you have made a fraudulent declaration, you have misrepresented your affairs. As you say, you lied. There may be consequences

Point taken.

BlisteringBarnacles

ColdIron said:

Nevertheless you have made a fraudulent declaration, you have misrepresented your affairs. As you say, you lied. There may be consequences

Quick update. 

After this conversation on his thread I wrote to HL, detailed my other 2 pensions with screenshots showing that the total exceeds 1 million but still quite a bit less than old LTA and 98% in cash. HL have said that is fine and if they need anything else they will get back to me. They did not say that the online application will be abandoned and I will have to switch to paper form. During the online application when it asked for other pension pots total exceeding 1 million, when the phone rep had already said "today is the last day", and then when she also said that more than 1 million means I would have to do it on paper, I asked what do we do now. She said "If you want to go back to previous page and answer No, you can go ahead and I will not comment on it". Because I was running out of time I proceeded.

Mentioned everything to II on the phone as well. As far as II are concerned they said that if the sum total is less than old LTA, then no need to do anything extra.

So thats where things stand now. Perhaps HL will cancel the application and switch to paper. Then I wont make it by Oct 30.