DB and DC pensions

Roryboy2011

Brie said:

I'd be reluctant to start a DB scheme any sooner than really needed.  is there a way to release money from the old DC scheme? and take some of the money from that instead to keep the DB guarantees intact.  must admit I don't know much about the MPAA rules and how taking money out of a DC scheme might effect things.  

was there a reason to not consider a mortgage?  Banks do allow them for older people than they used to.

Thanks for your reply. The thing is the money is really needed right now. The DC scheme wouldn't provide enough money and I have been advised that whilst a commencing a DB scheme wont trigger MPAA, commencing a DC scheme will and I don't want to limit what I can still pay into my 'live' DC scheme over the next few years.
The chances are I may still need to raise the shortfall of money via a mortgage but I need to keep this to a minimum to be able to afford the additional repayments on top of what I already pay each month.

Roryboy2011

LHW99 said:

What is the NRA from the DB schemes? ie how many years early would you take them?

Also, could there be a possibility of only putting one into payment, but converting some of the pension into lump sum, to get what you need?

It would depend on the conversion rate (some are pretty poor), and how much you actually need / how much the scheme allows you to convert.

Thank you for the reply. I would be taking them 6 years early. Both offer generous lump sum and reduced pension options and I would need both lump sums (and a little bit more) to buy him out.

AlanP_2

You can take the TFLS without taking any taxable money and leave the rest inside the pension wrapper until you want to use it.

QrizB

Roryboy2011 said:

DRS1 said:

To answer the question from the OP I don't think taking a pension from a DB Scheme triggers the MPAA.  I think it is only taking taxable income from a Money Purchase scheme which triggers it.

Thank you for your reply. Do you know if it is possible to take the 25% tax free lump sum from a DC but not take any of the taxable amount so not to trigger the MPAA? e.g could I purchase an annuity but not start the payments?

As I understand it, the MPAA only applies if you take flexible benefits from a DC pension.

• You can take a DB pension
• You can take the tax-free cash from a DC and leave the remaining uncrystallised
• You can take the tax-free cash from a DC and buy a lifetime annuity
  

... and the MPAA won't apply. But as soon as you take a penny of drawdown or UFPLS, or take a clever annuity, you invoke the MPAA.
I think this MoneyHelper page agrees with me, but it's more authoritative than I am:
https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/money-purchase-annual-allowance-mpaa

LHW99

Roryboy2011 said:

DRS1 said:

To answer the question from the OP I don't think taking a pension from a DB Scheme triggers the MPAA.  I think it is only taking taxable income from a Money Purchase scheme which triggers it.

Thank you for your reply. Do you know if it is possible to take the 25% tax free lump sum from a DC but not take any of the taxable amount so not to trigger the MPAA? e.g could I purchase an annuity but not start the payments?

You wouldn't normally use the TFLS to buy an annuity. You would take the lump sum, and use the rest for the annuity.

But taking the 25% tax free from a DC fund doesn't trigger the MPAA, only if you take 1p or more of (potentially) taxable money from the DC fund.

bjorn_toby_wilde

Copy and paste from Moneyhelper:

The MPAA won’t normally be triggered if:  

• you take a tax-free cash lump sum and buy a lifetime annuity that provides a guaranteed income for life that either stays level or increases 
• you take a tax-free cash lump sum and put your pension pot into flexi-access drawdown but don’t take any income from it.

bjorn_toby_wilde

QrizB said:

Roryboy2011 said:

DRS1 said:

To answer the question from the OP I don't think taking a pension from a DB Scheme triggers the MPAA.  I think it is only taking taxable income from a Money Purchase scheme which triggers it.

Thank you for your reply. Do you know if it is possible to take the 25% tax free lump sum from a DC but not take any of the taxable amount so not to trigger the MPAA? e.g could I purchase an annuity but not start the payments?

As I understand it, the MPAA only applies if you take flexible benefits from a DC pension.

• You can take a DB pension
• You can take the tax-free cash from a DC and leave the remaining uncrystallised
• You can take the tax-free cash from a DC and buy a lifetime annuity
  

... and the MPAA won't apply. But as soon as you take a penny of drawdown or UFPLS, or take a clever annuity, you invoke the MPAA.
I think this MoneyHelper page agrees with me, but it's more authoritative than I am:
https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/money-purchase-annual-allowance-mpaa

• You can take the tax-free cash from a DC and leave the remaining uncrystallised

I don’t think this bit is right. I believe that if you use FAD to access the 25% tax free then the remaining 75% is crystallised. Happy to be corrected but I think that’s the downside of doing it this way.  The 75% and any growth on it is then taxable.

QrizB

Sorry, yes, a stray "un" crept in. My error.

MallyGirl

LHW99 said:

Roryboy2011 said:

DRS1 said:

To answer the question from the OP I don't think taking a pension from a DB Scheme triggers the MPAA.  I think it is only taking taxable income from a Money Purchase scheme which triggers it.

Thank you for your reply. Do you know if it is possible to take the 25% tax free lump sum from a DC but not take any of the taxable amount so not to trigger the MPAA? e.g could I purchase an annuity but not start the payments?

You wouldn't normally use the TFLS to buy an annuity. You would take the lump sum, and use the rest for the annuity.

But taking the 25% tax free from a DC fund doesn't trigger the MPAA, only if you take 1p or more of (potentially) taxable money from the DC fund.

the annuity income is taxable so you would be turning tax free money into taxable if you bought a normal annuity with the TFLS.
There is a Purchased Life Annuity which is bought with non pension money but it is less common as a product.