Scheme specific protected tax free cash questions

Gucky_26

Hi, first time poster, long term lurker, so please be gentle.

I have a ring fenced Scottish Widows, protected tax free Retirement Acc pension, of which I was told several years ago by SW that the tax free portion was 34. something %. Its current value is £173000. As this is ring fenced, no contributions are made, just growth.

I also have a works pension with Aegon, currently worth £186000 and contributing to.

I'm also planning eventually to drawdown from both.

So, as I'm approaching 60 and maybe planning to retire in 2 years, my questions are.

Would I be better to drawdown from SW first to get the bigger tax free cash, and also I can carry on paying into Aegon?

Is the 34% fixed or can it fluctuate. If so why?

Would I have to take all the protected tax free cash in one go? If so why is this?

Are there any pitfalls of the protected tax free cash pension?

Sorry if I've rambled or forgotten anything, but I don't see much in these columns about PTFC.

Thanks.

DRS1

This may help

Scheme specific tax-free cash protection

Marcon

Sorry if I've rambled or forgotten anything, but I don't see much in these columns about PTFC.

It might be better to check with Scottish Widows, who will have the specific details about your pension with them, rather than relying on generic information on a public forum. For example, have you asked them to confirm that they have all the salary history they need in respect of your tax free cash? In the absence of the relevant earnings history, you are normally limited to the standard 25%.

Albermarle

Would I have to take all the protected tax free cash in one go? If so why is this

I do not know the specific answer to this question, but in general different pension providers have different rules about taking the tax free cash. Usually it is linked to the age of the pension, but not always. For example I have one pension ( which I will probably transfer out of one day) where they allow you to take the tax free cash in stages, but no taxable income until all the tax free cash is taken and you can get other variations.

On another point is that if you retire at 62 you will have a number of years before your state pension arrives. In that time you do not want to waste your annual personal tax allowance of £12570, so you should also plan to take taxable income from your pensions to that level, even if you do not need it ( assuming you will have no other taxable income source of course).

DRS1

OP If you are going to ask SW any of these questions I suggest you do it in writing. The chances of a call handler knowing the answers without referring to someone "technical" are remote. Also be prepared for them to say that they can't give "advice" (eg on the question of whether to take the SW pension/lump sum before the Aegon one)

dunstonh

Would I be better to drawdown from SW first to get the bigger tax free cash, and also I can carry on paying into Aegon?

Have you checked the existing SW supports drawdown (probably doesn't).

if not, you will have to check if it will support the payment of the tax free cash and a transfer of the flexible benefts to another plan.

Is the 34% fixed or can it fluctuate. If so why?

Its not fixed. its based on the value at A day (6th April 2006). Post A day valuation changes get 25%.

Would I have to take all the protected tax free cash in one go? If so why is this?

Almost certainly yes, assuming they allow you to transfer flexible benefits. It will be because the old plan almost certainly doesn't support drawdown, let alone phasing of drawdown, and you would lose the protection on transfer.

Are there any pitfalls of the protected tax free cash pension?

It may only be available with annuity.

Gucky_26

Thanks for all replies.

https://forums.moneysavingexpert.com/discussion/comment/81891231#Comment_81891231

Yes, I have spoke to the call handlers, who seem to read from a script and always mention 25% tax free, until I mention I have SSPTFC and then they say "Oh I can see mention of that now". But I think they know very little about SSPTFC. So I will write.

I don't expect them to tell me which pension first, that's why I thought I'd ask here.

Gucky_26

https://forums.moneysavingexpert.com/discussion/comment/81891273#Comment_81891273

The SW pension supports drawdown. It was buddy transferred to SW about 2016 purely for that reason from an annuity scheme.

DRS1

https://forums.moneysavingexpert.com/discussion/comment/81891759#Comment_81891759

On the which one first point check out the Aberdeen note I posted - near the end. It suggests taking the Aegon one first but of course that may only matter if the figures stack up a certain way. Otherwise it may not matter.