When exactly is a pension crystallised?

Reggieinthebath

Please bear with me for asking the blooming obvious (probably). I have a dc pension ( Aviva) and need to take between 10-25% of it over the next few years (am 56), the first 10% imminently as a lump sum and then probably the rest on an ad hoc basis ideally as drawdown. I have a long term health condition and am struggling now financially-trying to get part time work now, not easy out there. 

Anyway, I am stupidly confused still about this, ill health does t help, if I take the initial 10% shortly, does the whole 25% get crystallised or the whole pot? If it’s the whole pot, how do I most affordably work it so that I can draw down from it, flexibly, would I have to set up a SIPP? Aviva not been very helpful.  I want to avoid any unnecessary costs or to pay to see an IFA. 

Thanks for your patience. 

Reggieinthebath

To add, it’s a workplace pension, not contributing any more.

El_Torro

You can take 10% of your pot initially if you want. If you do that some of your pension will be crystallised and some will be uncrystallised. You can take further tax free money from the uncrystallised pot. 

Aviva has various pension schemes, some of which are pretty old. The older ones may not allow you to do what you want to do. If that is the case you can move that money to a newer private pension or SIPP to allow you to do what you want. Generally speaking this is straightforward, can all be done online and doesn't require you to pay for financial advice.

Reggieinthebath

Thank you, that’s helpful. So if I take 10% of a £200k pot, is it the. £50k which has been crystallised and so £150k can remain as is. And I’d need to move the £50k into a SIPP in order to enable future drawdowns? Their site says to call if questions but I’ve found them either rushing to offer commercial products and no real insight gleaned on actual options, I know they can’t give advice as such but not been terribly helpful. 

Marcon

Reggieinthebath said:

Please bear with me for asking the blooming obvious (probably). I have a dc pension ( Aviva) and need to take between 10-25% of it over the next few years (am 56), the first 10% imminently as a lump sum and then probably the rest on an ad hoc basis ideally as drawdown. I have a long term health condition and am struggling now financially-trying to get part time work now, not easy out there. 

Anyway, I am stupidly confused still about this, ill health does t help, if I take the initial 10% shortly, does the whole 25% get crystallised or the whole pot? If it’s the whole pot, how do I most affordably work it so that I can draw down from it, flexibly, would I have to set up a SIPP? Aviva not been very helpful.  I want to avoid any unnecessary costs or to pay to see an IFA. 

Thanks for your patience. 

When you say 'Aviva has not been very helpful', what exactly do you mean? Usually when someone posts that comment here, it either means the wires have crossed (often quite considerably!), or the poster is expecting their pension provider to give something which crosses the line between information and advice - and the latter is something the provider cannot and should not do, unless they are actually appointed to give you advice.

Aviva has a really good, detailed explanation on their website. Have a look at https://static.aviva.io/content/dam/document-library/adviser/adviserplatform/lf01125c.pdf

Reggieinthebath

yes, I have seen that on the website

MarlowMallard

For clarification above, there are two main ways to take it: if you take say £20k as "UFPLS",  then 25% = £5k is tax-free, £15k is taxed as income (added to the rest of your income for the tax year and taxed accordingly),  and everything left in the pot is uncrystallised and you can repeat as necessary.
 
If you take £20k as tax-free cash, that's all invisible to the taxman,  but then 3x that i.e. £60k of what's left in the pot becomes "crystallised" and will be subject to income tax when you take it out. The original pot minus the £80k will be uncrystallised.   (The £60k crystallised can grow with no CGT etc while left in the pot, but income-taxable at the point of taking out). 

Or, you can do a mixture of the above. 

QrizB

Reggieinthebath said:

Thank you, that’s helpful. So if I take 10% of a £200k pot, is it the. £50k which has been crystallised and so £150k can remain as is.

No.

10% of a £200k pot is £20k.

You could take this as a tax-free lump sum (TFLS) which would mean crystallising £80k of the fund. After taking the £20k TFLS, you'd have £120k uncrystallised and £60k crystallised.

Or you could take £20k as an uncrystallised funds pension lump sum (UFPLS). That would leave £180k uncrystallised in your pension, but the £20k would be £4k tax-free, £16k taxable.