Sanity check

movingon

I would be grateful if someone could please check my cunning plan for pension withdrawal possibilities prior to my appt with Vanguard? I have topped up state pension to max and will start that in 2029

I am 64 and have circa £200K in Vanguard sipp and £55K in with profits with old CGU, now with Aviva. Aviva have confirmed that there are no penalties for now withdrawing/transferring that pension. I am planning to transfer it into the Vanguard in low risk fund.

I am a non-tax payer but only just, and will only have about £2K left under the tax threshold 26-27. I want to take out 23K and put £20K in a S&S ISA after April 6th (already got an ISA for this tax year) and reinvest £2880 into the sipp. I also want to start flexible drawdown of £2K per annum either in a lump sum or via monthly amounts in the new tax year as well.

I don't want to take maximum TFC as I might want to get an annuity when reach state pension time as I will be paying tax then, but at the same time I guess I am trying to maximise tax saving opps for now.

Are there any pitfalls to this plan?

Should I wait until the Aviva money is in the sipp, or does it not matter?

Thank you

jimjames

Pitfall I can see is that you're paying more in fees than you need to with Vanguard. I switched from them last year to ii which made quite a big saving each year as well as more flexibility with funds.

Triumph13

You need to accept the fact that you are going to be paying tax on the great majority of the income you take from your DC funds. In three years time your SP will take your whole PA. That means your only priorities on the tax front should be:

1. To make sure you fully utilise your personal allowance every year
2. Get as much out tax free as possible using TFLS or UFPLS and shelter it in ISAs as soon as you can after withdrawal
3. Make sure you don't pay higher rate tax.

I would therefore look to do something like crystallise £80k of pension, taking a £20k TFLS to go into your ISA and £2k of taxable income to use up your PA. The remaining £58k stays in your pension to buy your annuity later. Repeat as necessary.

movingon

Thank you; that's where I was going with it , but you put it better!

Another thing I was wondering is, if say only 10% of the pot is taken in the first instance of TFC, and then you want to take some more another time, is it based on 15% balance of what is left, or do they just keep top slicing 25% of whats left? AI says top slicing, but that sounds as if you would ultimately get more than 25%, or am I over-thinking it?

Triumph13

The pot gets split. In the example you give, you start with 100% uncrystallised. To get 10% of that as TFC you have to crystallise 40% of it in total as you only get a quarter of what you crystallise as TFC. That leaves you with:

• 60% still uncrystallised, of which you still have the right to take a quarter as TFC in the future
• 30% crystallised - still sitting in the pension to be drawn down or used to buy an annuity later, but with no remaining TFC rights
• 10% cash tax free in your hot little hand.

movingon

Oh,that makes things much clearer. Thank you so much. So if I were to subsequently transfer in another pension or top it up with £2880, are the funds separated this way or can I choose to put them in the Uncrystallised pot?

bjorn_toby_wilde

They should automatically go into the uncrystallised pot provided any transfer in came from a similarly uncrystallised pot.

movingon

Thank you again🤗

leosayer

I don't want to take maximum TFC as I might want to get an annuity when reach state pension time as I will be paying tax then, but at the same time I guess I am trying to maximise tax saving opps for now.

Annuities are normally funded from crystallised pension, so taking the maximum TFC won't impact your annuity plans.

Albermarle

 I am planning to transfer it into the Vanguard in low risk fund.

Going too low risk can often be a risk in itself, either in a pension or a S&S ISA. You are only 64, so these funds may need to last you another 25 years, or more. Which fund do you mean with Vanguard ?

movingon

I am thinking Target Retirement 2030. At the moment I have different Target year funds in the Vanguard pension. When I spoke to Vanguard, they said that these Target funds are basically all the same, it is just the rate that they change allocations that are different. He said I could keep them just as they are, or change to one particular fund when I start drawdown. So I have just picked to add Target 2030 for the transfer.