£100,000 Pot taken as drawdown.

DE_612183

incus432 said:

DE_612183 said:

I've got a £100k put that I'm looking to use to cover a 6 year period between now and when the SP kicks in and I release other funds.

What I want to do is take one sixth of the £25k TFLS each year and one sixth of the £75k taxable each year.

Have you considered getting a quote for a fixed term annuity instead of drawdown? Rates are very good atm. You would take the TFLS then buy the annuity with the rest. I did this very recently to bridge a gap to SP, and the overall income payout (with a full term guarantee) was better than a gilt ladder would provide.

The MoneyHelper site gives you figures for various options without having to give your personal info. https://comparison.moneyhelper.org.uk/en/tools/annuities

I then went to Retirement Line who achieved considerably better quotes.

Of course drawdown would do better if your investments contiinue to rise rapidly, but certainty of income and not worrying about a crash matter too

If I bought a FTA would I pay tax at 40% for some of it?

25k is TFLS

Then of the 75k - 50k is either 0 or 20% and then the balance at 40% - or does the tax just kick in when the payments are made from the annuity?

Cobbler_tone

DE_612183 said:

incus432 said:

DE_612183 said:

I've got a £100k put that I'm looking to use to cover a 6 year period between now and when the SP kicks in and I release other funds.

What I want to do is take one sixth of the £25k TFLS each year and one sixth of the £75k taxable each year.

Have you considered getting a quote for a fixed term annuity instead of drawdown? Rates are very good atm. You would take the TFLS then buy the annuity with the rest. I did this very recently to bridge a gap to SP, and the overall income payout (with a full term guarantee) was better than a gilt ladder would provide.

The MoneyHelper site gives you figures for various options without having to give your personal info. https://comparison.moneyhelper.org.uk/en/tools/annuities

I then went to Retirement Line who achieved considerably better quotes.

Of course drawdown would do better if your investments contiinue to rise rapidly, but certainty of income and not worrying about a crash matter too

If I bought a FTA would I pay tax at 40% for some of it?

25k is TFLS

Then of the 75k - 50k is either 0 or 20% and then the balance at 40% - or does the tax just kick in when the payments are made from the annuity?

You'll pay whatever tax is due against your total income. Sometimes it can be easier to draw a lump sum once per year depending on the mechanics of the scheme.

Secret2ndAccount

The 75k going from your pension to the annuity is considered to have stayed within your pensions, so no tax there.
The payments you receive from the annuity are taxed as income - added to any other income you are making. So probably you pay 20% tax on those (or part of) - depends on your circumstances.

DE_612183

Secret2ndAccount said:

The 75k going from your pension to the annuity is considered to have stayed within your pension, so no tax.
The payments you receive from the annuity are taxed as income - added to any other income you are making. So probably you pay 20% tax on those - depends on your circumstances.

Thanks - that's really helpful.

DE_612183

Secret2ndAccount said:

The 75k going from your pension to the annuity is considered to have stayed within your pensions, so no tax there.
The payments you receive from the annuity are taxed as income - added to any other income you are making. So probably you pay 20% tax on those (or part of) - depends on your circumstances.

I presume I could take the 25% out in April 2025 - but do I need to buy an annuity at that point with the 75% even though I'd not need the payments to start until April 2026 - or so I just leave the money in the current pension and then but the annuity next year?

incus432

DE_612183 said:

Thanks - I did not know you could do a fixed term annuity - I just presumed they were "pay x until you die"

I think not many do. I think they can be an incredibly useful product. And much less of a commitment than a lifetime annuity.

I used Retirement Line to buy mine (they were excellent) but there is another source here https://www.sharingpensions.co.uk/  

Albermarle

DE_612183 said:

incus432 said:

DE_612183 said:

I've got a £100k put that I'm looking to use to cover a 6 year period between now and when the SP kicks in and I release other funds.

What I want to do is take one sixth of the £25k TFLS each year and one sixth of the £75k taxable each year.

Have you considered getting a quote for a fixed term annuity instead of drawdown? Rates are very good atm. You would take the TFLS then buy the annuity with the rest. I did this very recently to bridge a gap to SP, and the overall income payout (with a full term guarantee) was better than a gilt ladder would provide.

The MoneyHelper site gives you figures for various options without having to give your personal info. https://comparison.moneyhelper.org.uk/en/tools/annuities

I then went to Retirement Line who achieved considerably better quotes.

Of course drawdown would do better if your investments contiinue to rise rapidly, but certainty of income and not worrying about a crash matter too

Thanks - I did not know you could do a fixed term annuity - I just presumed they were "pay x until you die"

There are  many variations of annuity.
Fixed or lifetime
Linked to inflation or not
Fixed annual increase ( typically 3 or 5%)
Fixed with a sum returned at the end 
Guaranteed for a period if you die early
Spousal benefit , or not .
Reduced lifespan ( if you are a heavy smoker for example)
Etc

Whichever you get ( or a mixture) affects the annual income offered.

incus432

DE_612183 said:

If I bought a FTA would I pay tax at 40% for some of it?

25k is TFLS

Then of the 75k - 50k is either 0 or 20% and then the balance at 40% - or does the tax just kick in when the payments are made from the annuity?

You receive the TFLS is one go at the start (the annuity provider does this, not you) - no tax obviously.  You can feed this into an ISA (or other account if ISA fully subscribed) and invest in equities gilts or whatever, and draw on it as untaxed income if/as you need.

Yes- when the annuity income starts you pay tax on it as (with any other income) at your marginal rate.

incus432

DE_612183 said:

I presume I could take the 25% out in April 2025 - but do I need to buy an annuity at that point with the 75% even though I'd not need the payments to start until April 2026 - or so I just leave the money in the current pension and then but the annuity next year?

The way it worked for me is that the whole pot incl TFLS was transferred to the annuity provider who paid out the lump sum and arranged the annuity. It was very fast - under 3 weeks from application to all sorted and paid out.  They called it an 'Immediate Vesting Personal Pension' as distinct from 'Open Market Option'.  You'd have to check if you could take the TFLS yourself then arrange the FT annuity later - i would expect so but don't know.

arthur_fowler

incus432 said:

DE_612183 said:

I presume I could take the 25% out in April 2025 - but do I need to buy an annuity at that point with the 75% even though I'd not need the payments to start until April 2026 - or so I just leave the money in the current pension and then but the annuity next year?

The way it worked for me is that the whole pot incl TFLS was transferred to the annuity provider who paid out the lump sum and arranged the annuity. It was very fast - under 3 weeks from application to all sorted and paid out.  They called it an 'Immediate Vesting Personal Pension' as distinct from 'Open Market Option'.  You'd have to check if you could take the TFLS yourself then arrange the FT annuity later - i would expect so but don't know.

Mine took closer to 8 weeks (thankfully as it turned out). Depends hugely on the two (or three) companies involved. Lifesight were v.slow.