Argh - think I misunderstood tax on lump sums.

QrizB

ThisIsWeird said:

You have completely ignored the fact that I am stupid.

Sorry   and I've read enough of your posts that I'm not going to accept that as a fact!

ThisIsWeird said:

Thanks all. £10k and a pension it is, then. Probably.

If you are hoping to retire earlier than your state pension age (67 or 68?) then you might have a number of years when you have little or no taxable income. In that situation, you might choose "a series of lump sums" since, while 75% of the lump sum would be taxable, some or all of that 75% would be covered by your tax-free allowance for the year.

But we're now getting into the whole planning-for-retirement discussion, which is a bigger question than the one you started this thread with.

DRS1

I do not know how old you are but the annuity rate looks good.  If you do decide to take an annuity you will be advised to do some comparison shopping to see if that is the best deal you can get (and to see if lifestyle and health will make a difference).  Also there are different options with annuities eg level or increasing, single or joint life all of which make a difference to what you would get.

Albermarle

I can see now that many of the options - such as taking it in a number of lump sums - will require it to be transferred to another plan by Phoenix or another provider.

The one thing that's still unclear to me is whether - if I did transfer - I'd be able to take a lump sum, each year, tax-free, up to a max of 25% of the remaining sum, until it's all gorn? Does anyone know, or do I need to contact Phoenix or others to ask

In practical terms, it is worth knowing that it is very easy to open up a new modern pension on line and transfer this old pension into it. You can also bring the smaller £15K on in as well. 

Regarding the tax free lump sums etc. it will all probably become clearer if you understand the concept of crystallisation ( not as in chemistry but for DC pensions).

Before you have made any withdrawals the pot is uncrystallised, lets say for example it is £80,000.

If you want to take £5K tax free, then £20K of the pot has to be crystallised . The £5K goes to your bank and £30K of the pot is now left as crystallised funds and £60K remains uncrystallised.
If you withdraw from the crystallised funds it taxable income ( how much actual tax will depend on your tax situation).
Every time you want more tax free, you have to crystallise more of the uncrystallised funds.

ThisIsWeird

Albermarle said:

I can see now that many of the options - such as taking it in a number of lump sums - will require it to be transferred to another plan by Phoenix or another provider.

The one thing that's still unclear to me is whether - if I did transfer - I'd be able to take a lump sum, each year, tax-free, up to a max of 25% of the remaining sum, until it's all gorn? Does anyone know, or do I need to contact Phoenix or others to ask

In practical terms, it is worth knowing that it is very easy to open up a new modern pension on line and transfer this old pension into it. You can also bring the smaller £15K on in as well. 

Regarding the tax free lump sums etc. it will all probably become clearer if you understand the concept of crystallisation ( not as in chemistry but for DC pensions).

Before you have made any withdrawals the pot is uncrystallised, lets say for example it is £80,000.

If you want to take £5K tax free, then £20K of the pot has to be crystallised . The £5K goes to your bank and £30K of the pot is now left as crystallised funds and £60K remains uncrystallised.
If you withdraw from the crystallised funds it taxable income ( how much actual tax will depend on your tax situation).
Every time you want more tax free, you have to crystallise more of the uncrystallised funds.

You started off sensibly, then went all technical. Crystallised ma botty.
Thanks everyone - I have that tax part clear. 
Cheers, Qriz - alas, pension age now arrived at, and drawing t'State, so a tax-payer again. :-)
Thanks, DRS1 - what do you mean by the 'annuity rate looks good'? How can you tell?
But, yes, it would make sense to combine the two - I shall investigate, and even shop around, but I fear it'll be t'death of me...

DRS1

Well I thought the rate was c 6.6% (though that was based on a round £40k pot and as I said I did not know your age.  If you are over SPA maybe it is not so good.).

You can see annuity rates for different annuities and ages here

Annuity Rates: View Best Annuity Rates from the UK Market

Of course you don't have to buy an annuity.  You can do drawdown instead.

By the by when @Albermarle says  "£30K of the pot is now left as crystallised funds" I think he means £15k

Albermarle

DRS1 said:

Well I thought the rate was c 6.6% (though that was based on a round £40k pot and as I said I did not know your age.  If you are over SPA maybe it is not so good.).

You can see annuity rates for different annuities and ages here

Annuity Rates: View Best Annuity Rates from the UK Market

Of course you don't have to buy an annuity.  You can do drawdown instead.

By the by when @Albermarle says  "£30K of the pot is now left as crystallised funds" I think he means £15k

Correct, my mistake .

ThisIsWeird

DRS1 said:

Well I thought the rate was c 6.6% (though that was based on a round £40k pot and as I said I did not know your age.  If you are over SPA maybe it is not so good.).
You can see annuity rates for different annuities and ages here
Annuity Rates: View Best Annuity Rates from the UK Market
Of course you don't have to buy an annuity.  You can do drawdown instead.

Thanks, DRS1 - that's very useful.

ThisIsWeird

Thoughts on 'MyPensionExpert'?
Amusingly, and seemingly following this thread, my Googles started springing up 'pension-advice' company adverts...
Anyhoo, submitting basic info to MPE solicited a phone call, and a much better annuity rate than Phoenix's.
Any experience?
Ta.

Albermarle

ThisIsWeird said:

Thoughts on 'MyPensionExpert'?
Amusingly, and seemingly following this thread, my Googles started springing up 'pension-advice' company adverts...
Anyhoo, submitting basic info to MPE solicited a phone call, and a much better annuity rate than Phoenix's.
Any experience?
Ta.

No experience but they do advertise a lot. 

Just a hint - when comparing annuities you have to be 100% sure you are comparing apples with apples.

Some have a link to RPI, or CPI , or they may have a fixed % increase each year. Or they may be a level annuity, which does not increase each year.
Some will pay a Spouse a % of the pension if you die. Some will not 
Some will have a guarantee period, where money is paid back if you die within 5 years for example. Some will not.

All these conditions being present or not will affect the annual income offered. 

TheGreenFrog

ThisIsWeird said:

Thoughts on 'MyPensionExpert'?
Amusingly, and seemingly following this thread, my Googles started springing up 'pension-advice' company adverts...
Anyhoo, submitting basic info to MPE solicited a phone call, and a much better annuity rate than Phoenix's.
Any experience?
Ta.

No experience of them but suggest you also register on Hargreaves Lansdown Annuities.  There you get instant realtime quotes and no-one calls you up after and they don’t send you loads of annoying follow-up emails (well I have only received two in as many months).  Just another way to check the annuity rate.