Crystallisation and Annuities

Spivo46

I have a crystallised pension portfolio with Royal London. I have not taken any taxable income yet. I called them this week to ask about taking a portion of the fund to buy a fixed term income. They informed me that it is not possible to do that, however i could buy an annuity type product  using all of the fund. Is this normal?

Marcon

See the second post in this thread from last week, which should be helpful: https://forums.moneysavingexpert.com/discussion/comment/81814786#Comment_81814786?utm_source=community-search&utm_medium=organic-search&utm_term=buying+annuity+with+crystallised+funds

Spivo46

Marcon said:

See the second post in this thread from last week, which should be helpful: https://forums.moneysavingexpert.com/discussion/comment/81814786#Comment_81814786?utm_source=community-search&utm_medium=organic-search&utm_term=buying+annuity+with+crystallised+funds

Thank you, but i am still not clear on my options. What is the difference in taking cash withdrawals for my pot and/or taking a percentage to buy an annuity? I am missing something

Spivo46

I agree, and certainly not arguing. However i am curious because closing my account with RL would surely not be the preference for them. There must be a reason for their stance.

dunstonh

Spivo46 said:

I have a crystallised pension portfolio with Royal London. I have not taken any taxable income yet. I called them this week to ask about taking a portion of the fund to buy a fixed term income. They informed me that it is not possible to do that, however i could buy an annuity type product  using all of the fund. Is this normal?

Yes it is normal.  You can buy either a fixed term annuity or a lifetime annuity.  RL offer neither.  Or you can utilise drawdown with an annuity within it (RL wouldn't be aware of that product type, and it's not available to the DIY market, only IFAs) or you can use drawdown in more conventional ways, such as unit-linked funds.

You cannot split a crystallised fund either (so you cannot take a portion)

Thank you, but i am still not clear on my options. What is the difference in taking cash withdrawals for my pot and/or taking a percentage to buy an annuity? I am missing something

 A fixed-term annuity is effectively risk-free, assuming the draw rate and timescale are sensible (it could be high risk if it's not). A lifetime annuity is risk-free, as you are guaranteed to get that amount (level or indexed) for life. whereas a drawdown is risk-based.

However i am curious because closing my account with RL would surely not be the preference for them. There must be a reason for their stance.

The fact they do not offer annuities is their reason.

SVaz

“You cannot split a crystallised fund either (so you cannot take a portion)”

Do you mean that nobody can use part of a crystallised pot for either a Lifetime Annuity or a Fixed term one?   With any Pension provider?  

That seems bizzarre. 

So what options for guaranteed income are there other than using part of a crystallised pot to set up a Gilt ladder?  

Albermarle

You cannot split a crystallised fund either (so you cannot take a portio

Same applies if you want to transfer a crystallised pension pot from one DC pension provider to another.
It has to be all or nothing, which is not the case for uncrystallised pensions.

One exception is buying a lifetime annuity with part of the crystallised pension, and leaving the rest in drawdown. I assume this is what @dunstonh was referring to as something not possible/available in the DIY market. 

Fermion

Albermarle said:

You cannot split a crystallised fund either (so you cannot take a portio

Same applies if you want to transfer a crystallised pension pot from one DC pension provider to another.
It has to be all or nothing, which is not the case for uncrystallised pensions.

One exception is buying a lifetime annuity with part of the crystallised pension, and leaving the rest in drawdown. I assume this is what @dunstonh was referring to as something not possible/available in the DIY market. 

Not sure I quite understand that original statement either. I had a £970K DIY crystallised pot in drawdown with HL and recently bought a £300K annuity with L&G via a HL annuity quote.

Secret2ndAccount

SVaz said:

“You cannot split a crystallised fund either (so you cannot take a portion)”

Do you mean that nobody can use part of a crystallised pot for either a Lifetime Annuity or a Fixed term one?   With any Pension provider?  

That seems bizzarre. 

So what options for guaranteed income are there other than using part of a crystallised pot to set up a Gilt ladder?  

You CAN use part of a crystallised pot to buy a lifetime annuity.
The law: Finance Act 2004, Schedule 28, Paragraph 10(4)
HMRC's tax manuals: PTM062560 and PTM062570

You can also break up a crystallised pot in the case of a divorce

You cannot, in general, make a partial transfer out of a crystallised pot.

Of course, that's just the rules. Maybe some providers don't want to deal with it, so your choice of annuity might be restricted. I can't speak to that. We see plenty of examples around here where something is allowed but you can't do it.

Spivo46

Secret2ndAccount said:

SVaz said:

“You cannot split a crystallised fund either (so you cannot take a portion)”

Do you mean that nobody can use part of a crystallised pot for either a Lifetime Annuity or a Fixed term one?   With any Pension provider?  

That seems bizzarre. 

So what options for guaranteed income are there other than using part of a crystallised pot to set up a Gilt ladder?  

You CAN use part of a crystallised pot to buy a lifetime annuity.
The law: Finance Act 2004, Schedule 28, Paragraph 10(4)
HMRC's tax manuals: PTM062560 and PTM062570

You can also break up a crystallised pot in the case of a divorce

You cannot, in general, make a partial transfer out of a crystallised pot.

Of course, that's just the rules. Maybe some providers don't want to deal with it, so your choice of annuity might be restricted. I can't speak to that. We see plenty of examples around here where something is allowed but you can't do it.

Thank you - so for clarity, i could in theory buy a lifetime annuity with part of my pot and not a fix term annuity. RL inform me that it all or nothing! So, RL just dont want the hassle?

QrizB

Spivo46 said:

RL inform me that it all or nothing! So, RL just dont want the hassle?

RL aren't authorised to provide advice.

Their customer service reps are able to tell you what you can do with RL (without any comments on whether it's a good idea or not) but can't tell you what you can do if you look elsewhere.