Pension access, self managed? Short to medium view..

stevechoo

Hi everyone, I've posted a couple of threads recently, I'll try to bring them together into one..

I've recently turned 55, I was considering accessing some of my money purchase pensions.  I've been through a review via pension wise, and I decided to do nothing in relation to that, ie, self managed access or enlist a financial advisor..

Since then, ie, this week (and totally unrelated to above) my wife and I have started the process of divorce.  As I am on low contracted hours in my job atm I am unable to get the remortgage I need in order to meet the financial settlement that enables me to take full possession of the house we are currently living in..

In light of this, I need to potentially revisit the pension access scenario. Over the last month or so I've gained a better level of understanding where I can do a partial trf to my inactive fund and drawdown the 25% tax free amount from there, leaving the remainder untouched goin forward into the long term. The financial advisor I spoke to a few weeks back discussed the option of enlisting their services to manage the new fund for a 3% introduction fee and 1% annual charge goin forward, obviously mentioning the potential increased returns / future performance that could incur by doin this..

The pension fund I would potentially draw down from has been performing well in recent years..  I suppose my question is if I was to do it myself, ie, partial trf and take out the tax free allowance, what will happen to that pension fund (in terms of future performance) once placed into drawdown that wouldnt have happened if I leave it untouched?

I'm thinking in the short to medium term as I may decide to enlist the services of a financial advisor at some point in the future..

Any feedback will be greatly appreciated..

Many thanks in advance..

MK62

stevechoo said:

The pension fund I would potentially draw down from has been performing well in recent years..  I suppose my question is if I was to do it myself, ie, partial trf and take out the tax free allowance, what will happen to that pension fund (in terms of future performance) once placed into drawdown that wouldnt have happened if I leave it untouched?

As long as you only take the tax free lump sum, then nothing will happen other than the pension will be deemed to be crystallised (aka placed into drawdown), and if no new contributions are added, will have no further tax free cash available. If you take any taxable money out, then you will become subject to the MPAA (ie limited to max 10k pa contributions to DC schemes for the rest of your life.......which may or may not be relevant to you) 

If the crystallised pension remains in the same fund(s), then future performance will be the same.....albeit the total amount will obviously be smaller.

Dazed_and_C0nfused

stevechoo said:

Hi everyone, I've posted a couple of threads recently, I'll try to bring them together into one..

I've recently turned 55, I was considering accessing some of my money purchase pensions.  I've been through a review via pension wise, and I decided to do nothing in relation to that, ie, self managed access or enlist a financial advisor..

Since then, ie, this week (and totally unrelated to above) my wife and I have started the process of divorce.  As I am on low contracted hours in my job atm I am unable to get the remortgage I need in order to meet the financial settlement that enables me to take full possession of the house we are currently living in..

In light of this, I need to potentially revisit the pension access scenario. Over the last month or so I've gained a better level of understanding where I can do a partial trf to my inactive fund and drawdown the 25% tax free amount from there, leaving the remainder untouched goin forward into the long term. The financial advisor I spoke to a few weeks back discussed the option of enlisting their services to manage the new fund for a 3% introduction fee and 1% annual charge goin forward, obviously mentioning the potential increased returns / future performance that could incur by doin this..

The pension fund I would potentially draw down from has been performing well in recent years..  I suppose my question is if I was to do it myself, ie, partial trf and take out the tax free allowance, what will happen to that pension fund (in terms of future performance) once placed into drawdown that wouldnt have happened if I leave it untouched?

I'm thinking in the short to medium term as I may decide to enlist the services of a financial advisor at some point in the future..

Any feedback will be greatly appreciated..

Many thanks in advance..

You twice refer to a financial advisor.  Whatever you end up doing the normal choice is to either DIY or use an independent financial advisor.

No one on here is going to recommend using a financial advisor as a sensible option.

stevechoo

MK62 said:

stevechoo said:

The pension fund I would potentially draw down from has been performing well in recent years..  I suppose my question is if I was to do it myself, ie, partial trf and take out the tax free allowance, what will happen to that pension fund (in terms of future performance) once placed into drawdown that wouldnt have happened if I leave it untouched?

As long as you only take the tax free lump sum, then nothing will happen other than the pension will be deemed to be crystallised (aka placed into drawdown), and if no new contributions are added, will have no further tax free cash available. If you take any taxable money out, then you will become subject to the MPAA (ie limited to max 10k pa contributions to DC schemes for the rest of your life.......which may or may not be relevant to you) 

If the crystallised pension remains in the same fund(s), then future performance will be the same.....albeit the total amount will obviously be smaller.

I suppose this is the answer I was hoping to receive, ie, that I have nothing to fear if I decide to undertake this process myself?!??...

Thank you both..

tacpot12

I would say that you have relatively little to fear if you do it yourself, and you have the potential so save quite a bit of money. 

The biggest risk is that by having the money to buy your home, you won't have it to live on in retirement. The divorce might be a good time to consider downsizing to something that would suit you in retirement. 

Albermarle

MK62 said:

stevechoo said:

The pension fund I would potentially draw down from has been performing well in recent years..  I suppose my question is if I was to do it myself, ie, partial trf and take out the tax free allowance, what will happen to that pension fund (in terms of future performance) once placed into drawdown that wouldnt have happened if I leave it untouched?

As long as you only take the tax free lump sum, then nothing will happen other than the pension will be deemed to be crystallised (aka placed into drawdown), and if no new contributions are added, will have no further tax free cash available. If you take any taxable money out, then you will become subject to the MPAA (ie limited to max 10k pa contributions to DC schemes for the rest of your life.......which may or may not be relevant to you) 

If the crystallised pension remains in the same fund(s), then future performance will be the same.....albeit the total amount will obviously be smaller.

I think with most providers if you ask to take the 25% tax free cash, they will cash in a proportionate amount of each investment(s) to provider the necessary amount of cash. This would leave the investment(s) in the remaining crystallised part, in exactly the same proportions as before.
However some providers will expect you to sell the investments in advance, so the cash is ready and available.
In this case you could change the balance of the investments if you wanted, by selling more of one than another. 

stevechoo

tacpot12 said:

I would say that you have relatively little to fear if you do it yourself, and you have the potential so save quite a bit of money. 

The biggest risk is that by having the money to buy your home, you won't have it to live on in retirement. The divorce might be a good time to consider downsizing to something that would suit you in retirement. 

Thank you very much, selling is an option that I am prepared to consider at some point, although at the moment I would like to keep the house ideally..

stevechoo

Albermarle said:

MK62 said:

stevechoo said:

The pension fund I would potentially draw down from has been performing well in recent years..  I suppose my question is if I was to do it myself, ie, partial trf and take out the tax free allowance, what will happen to that pension fund (in terms of future performance) once placed into drawdown that wouldnt have happened if I leave it untouched?

As long as you only take the tax free lump sum, then nothing will happen other than the pension will be deemed to be crystallised (aka placed into drawdown), and if no new contributions are added, will have no further tax free cash available. If you take any taxable money out, then you will become subject to the MPAA (ie limited to max 10k pa contributions to DC schemes for the rest of your life.......which may or may not be relevant to you) 

If the crystallised pension remains in the same fund(s), then future performance will be the same.....albeit the total amount will obviously be smaller.

I think with most providers if you ask to take the 25% tax free cash, they will cash in a proportionate amount of each investment(s) to provider the necessary amount of cash. This would leave the investment(s) in the remaining crystallised part, in exactly the same proportions as before.
However some providers will expect you to sell the investments in advance, so the cash is ready and available.
In this case you could change the balance of the investments if you wanted, by selling more of one than another. 

My intention at the moment is to make a partial trf (although that will only leave a few thousand pounds in there) from my current workplace pension, therefore this pension then remains non-crystallised and will remain active for the next few years receiving monthly payments from my job which i have no plans to leave anytime soon..  

Into my private pension (that i had with a previous employer) which is no longer active in terms of receiving incoming paye payments, this pension after taking the 25% tax free element down would then become the one crystallised pension out of the two..

I thought it may be better doing it this way in order to keep the current pension active?...

Thanks again

Albermarle

stevechoo said:

Albermarle said:

MK62 said:

stevechoo said:

The pension fund I would potentially draw down from has been performing well in recent years..  I suppose my question is if I was to do it myself, ie, partial trf and take out the tax free allowance, what will happen to that pension fund (in terms of future performance) once placed into drawdown that wouldnt have happened if I leave it untouched?

As long as you only take the tax free lump sum, then nothing will happen other than the pension will be deemed to be crystallised (aka placed into drawdown), and if no new contributions are added, will have no further tax free cash available. If you take any taxable money out, then you will become subject to the MPAA (ie limited to max 10k pa contributions to DC schemes for the rest of your life.......which may or may not be relevant to you) 

If the crystallised pension remains in the same fund(s), then future performance will be the same.....albeit the total amount will obviously be smaller.

I think with most providers if you ask to take the 25% tax free cash, they will cash in a proportionate amount of each investment(s) to provider the necessary amount of cash. This would leave the investment(s) in the remaining crystallised part, in exactly the same proportions as before.
However some providers will expect you to sell the investments in advance, so the cash is ready and available.
In this case you could change the balance of the investments if you wanted, by selling more of one than another. 

My intention at the moment is to make a partial trf (although that will only leave a few thousand pounds in there) from my current workplace pension, therefore this pension then remains non-crystallised and will remain active for the next few years receiving monthly payments from my job which i have no plans to leave anytime soon..  

Into my private pension (that i had with a previous employer) which is no longer active in terms of receiving incoming paye payments, this pension after taking the 25% tax free element down would then become the one crystallised pension out of the two..

I thought it may be better doing it this way in order to keep the current pension active?...

Thanks again

You should check with your workplace pension provider that it is OK to make a withdrawal and continue contributing.
Normally it should be but they can occasionally have restrictive rules.

Your private pension plan is fine, but you still  need to keep an eye on how the remaining crystallised part is performing in future.

stevechoo

Once again, thanks to everyone for the wonderful feedback I've received to this so far, it's greatly appreciated...

Some thing has literally just come to mind... I'm unable to get any amount of secured loan due to my current low contracted hours...

I'm currently 15k short my settlement figure... Drawing off the taxable element of my pension is an option.. draw 20k, pay 4k tax was my thinking which didnt appeal to me initially...

But I assume if I draw 15k taxable additional along with the tax free element of the pension, then I declare this in my self assessment due by January 2026? And this is paid through my new tax code issued by HMRC accordingly? 

Is this correct?...

MallyGirl

You will pay tax on the taxable element at the time of the drawdown. The tax will be recalculated by HMRC later in case it wasn't quite right. It depends on time of withdrawal within the tax year how far out it is.  I think that the pension provider works on the principle that the first taxable withdrawal is the first of a regular series of the same amount monthly and they don't have a tax code yet so will likely take too much tax off.