Options for preserving PCLS

LV_426

I want to help my daughter buy a flat, using my 25% PCLS. I'm 58. This is a DC pension.
This money is needed in the next 1-2 years.
My pension total has just achieved the target value for the required PCLS.
I'm worried about an imminent market crash that could set me back a long time.
So the options I'm considering to preserve the PCLS amount are:-

1. De-risking investments by switching whole fund to a safer money market or cash fund.
2. Crystallise now, but defer PCLS payment (provider may not allow this)
3. Crystallise now, take the PCLS and put it in a safe place, such as NS&I growth bond.

I'm aware that there's a 12 month limit on taking a deferred PCLS, after which you lose the tax free status.

I don't want to use the pension for drawdown as I'm still working.

Dazed_and_C0nfused

LV_426 said:

I want to help my daughter buy a flat, using my 25% PCLS. I'm 58. 
This money is needed in the next 1-2 years.
My pension total has just achieved the target value for the required PCLS.
I'm worried about an imminent market crash that could set me back a long time.
So the options I'm considering to preserve the PCLS amount are:-

1. De-risking investments by switching whole fund to a safer money market or cash fund.
2. Crystallise now, but defer PCLS payment (provider may not allow this)
3. Crystallise now, take the PCLS and put it in a safe place, such as NS&I growth bond.

I'm aware that there's a 12 month limit on taking a deferred PCLS, after which you lose the tax free status.

I don't want to use the pension for drawdown as I'm still working.

PCLS is more commonly referred to in connection with a DB pension.

Is your pension DB or DC?

wjr4

Dazed_and_C0nfused said:

LV_426 said:

I want to help my daughter buy a flat, using my 25% PCLS. I'm 58. 
This money is needed in the next 1-2 years.
My pension total has just achieved the target value for the required PCLS.
I'm worried about an imminent market crash that could set me back a long time.
So the options I'm considering to preserve the PCLS amount are:-

1. De-risking investments by switching whole fund to a safer money market or cash fund.
2. Crystallise now, but defer PCLS payment (provider may not allow this)
3. Crystallise now, take the PCLS and put it in a safe place, such as NS&I growth bond.

I'm aware that there's a 12 month limit on taking a deferred PCLS, after which you lose the tax free status.

I don't want to use the pension for drawdown as I'm still working.

PCLS is more commonly referred to in connection with a DB pension.

Is your pension DB or DC?

Incorrect, it’s the technical term that should be used. 

Albermarle

LV_426 said:

I want to help my daughter buy a flat, using my 25% PCLS. I'm 58. This is a DC pension.
This money is needed in the next 1-2 years.
My pension total has just achieved the target value for the required PCLS.
I'm worried about an imminent market crash that could set me back a long time.
So the options I'm considering to preserve the PCLS amount are:-

1. De-risking investments by switching whole fund to a safer money market or cash fund.
2. Crystallise now, but defer PCLS payment (provider may not allow this)
3. Crystallise now, take the PCLS and put it in a safe place, such as NS&I growth bond.

I'm aware that there's a 12 month limit on taking a deferred PCLS, after which you lose the tax free status.

I don't want to use the pension for drawdown as I'm still working.

I do not think a DC pension provider would allow you to defer the tax free lump sum.
In any case they would have to put it somewhere, presumably in a cash account earning 3% or similar. You could do the same in your pension now, with the same outcome.

I'm aware that there's a 12 month limit on taking a deferred PCLS, after which you lose the tax free status.

I have never heard of this but I suspect it is related to DB/final salary pensions and not DC pensions, where you have flexibility when to take it , so deferring it is not relevant.

Maybe someone else will know more.

Marcon

I think OP might have been quoting from an AI generated answer.

Here's HMRC's take on things: https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm063220

Marcon

wjr4 said:

Dazed_and_C0nfused said:

LV_426 said:

I want to help my daughter buy a flat, using my 25% PCLS. I'm 58. 
This money is needed in the next 1-2 years.
My pension total has just achieved the target value for the required PCLS.
I'm worried about an imminent market crash that could set me back a long time.
So the options I'm considering to preserve the PCLS amount are:-

1. De-risking investments by switching whole fund to a safer money market or cash fund.
2. Crystallise now, but defer PCLS payment (provider may not allow this)
3. Crystallise now, take the PCLS and put it in a safe place, such as NS&I growth bond.

I'm aware that there's a 12 month limit on taking a deferred PCLS, after which you lose the tax free status.

I don't want to use the pension for drawdown as I'm still working.

PCLS is more commonly referred to in connection with a DB pension.

Is your pension DB or DC?

Incorrect, it’s the technical term that should be used. 

...and has been since the days when people with DC pensions had to take tax free cash and buy an annuity at the same time, thus making it a true PCLS. It is now technically correct but wrong in practical terms, since that requirement was removed a decade ago - but the jargon lingers on...

af1963

"Crystallise" in this context means taking the lump sum, and leaving the remaining taxable part of the pension invested. So I don't think option 2 really exists. You don't crystallise until you take the lump sum.
 
If you really want to guarantee the current tax free sum and protect its value, your options 1 and 3 both do that.  Option 1 means your whole pension is moved to less risky investments,  while option 3 means just the tax free lump sum is de-risked. 

It doesn't need to be a choice of one or the other. You could de-risk the whole or part of the pension and *also* take out the lump sum now and put it into ISA/bonds/cash savings etc.  If it's invested outside a pension and ISA, there may be tax to pay on the interest. If you plan on giving it to your daughter anyway, you might be able to give some of it to her immediately so she can use her own ISA allowance and interest allowance.

SVaz

Just take the money out and put it in a savings account,  then it doesn’t matter what happens with the pension.
Also makes it easier when gifting the money when it comes to the mortgage,  you just need a bank statement when the money’s been there a while whereas I needed a letter from my pension company as evidence of where the money had come from when I gifted my Daughter her deposit because the money had gone in and straight out of my bank account.   

Albermarle

SVaz said:

Just take the money out and put it in a savings account,  then it doesn’t matter what happens with the pension.
Also makes it easier when gifting the money when it comes to the mortgage,  you just need a bank statement when the money’s been there a while whereas I needed a letter from my pension company as evidence of where the money had come from when I gifted my Daughter her deposit because the money had gone in and straight out of my bank account.   

I also acted as Bank of Dad, by pulling a tax free lump sum from one pension.
Initially I had to prove the pension existed, by using screenshots, but was never asked for anything else. ( except the actual signed gifting letter ) 

Every conveyancer solicitor seems to have a different take on these AML checks.

LV_426

Thanks folks, I was a bit hazy on option 2, and whether or not it was actually possible. But I've pretty much settled on taking the lump sum (or whatever it's called) and stashing it somewhere safe. Leaving the rest invested to weather whatever stormy conditions may be inflicted on us. That won't be needed for some time anyway.

Albermarle

LV_426 said:

Thanks folks, I was a bit hazy on option 2, and whether or not it was actually possible. But I've pretty much settled on taking the lump sum (or whatever it's called) and stashing it somewhere safe. Leaving the rest invested to weather whatever stormy conditions may be inflicted on us. That won't be needed for some time anyway.

The weather in global financial markets has been very warm and Sunny for some time.
So even if it does get a bit stormy for a while, that’s part of the long term game.