Financial Advisor Woes

dunstonh

https://forums.moneysavingexpert.com/discussion/comment/82113017#Comment_82113017

I don't get the logic in that, I'm afraid.

You appear to believe that there's some complication involved by having uncrystallised and crystallised funds on the same platform. There isn't.

QrizB

You appear to believe that there's some complication involved by having uncrystallised and crystallised funds on the same platform. There isn't.

Also, OP's own example of what they want to do - crystallising a sum and then taking the taxable part as monthly income - involves doing exactly that.

mrklaw

why wouldn’t you want to take enhanced tfc? can’t aegon let you do FAD so you do your plan only taking a higher % of TFC and the same or less taxable at 20%?

or take the enhanced TFC from aegon then transfer the rest to ii and draw it taxable. If you draw £3750 as your example you’re paying the same 20% on that. the £1250 you already have because you drew it from Aegon so you can top it up at will from your savings/ISA. But you’ll have more than £1250 available because it was enhanced.

TheComputerGuru

BUT - As I am lucky enough to not need to do anything useful with the enhanced TFC

If I take the full enhanced TFC I will have to stash it somewhere

If I simply in put it into a high interest account then the yearly interest will push my total tax liability for each year into 40% territory.

dunstonh

If I take the full enhanced TFC I will have to stash it somewhere

You put it in the stocks and shares ISA. Nice and easy. On the same platform, using the same investments. No complications whatsoever. You can also put a small amount back into the pension again.

If I simply in put it into a high interest account then my total tax liability for each year will push me into 40% territory.

Don't put it in a high-interest account then.

mrklaw

not taking tax free cash because you might pay tax on interest which is still more than taking taking less tax free cash starts to feel like cutting off your nose to spite your face.

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82113088#Comment_82113088

I confess I do not understand your reasoning.

If the policy is worth £100k and you have an enhanced tax free sum of £40k why would you want to make a transfer to give yourself a tax free sum of only £25k? You are worried about paying higher rate tax but you would have turned £15k of your pension from tax free money into taxable money. That doesn't make sense.

You say you will have to stash it somewhere. Yes. ISAs suggest themselves as a possibility. But maybe you have used your ISA allowance up. So let's ignore them. Premium bonds are another possibility but maybe you have maxed them out as well.

You do however want to be drawing an amount out of your pension each year. Some have suggested drawing part from the pension and part from the tax free cash you will have taken (two sources instead of one and you don't like that). But if you set yourself an annual amount to take from the £40k enhanced tax free cash - say £4k pa. - then you could set up a ladder of index linked gilts paying out over say 10 years. Buy £4k worth for each year (it may not be exact because of maturity dates) and sit back and let the proceeds roll in. Yes there will be coupons which will be subject to income tax but nowhere near as much as the high interest savings account would generate. The capital gain on the maturity of each ILG would be CGT free. Obviously I don't know how little interest would push you over the higher rate threshhold.

I suppose one question is when you take the enhanced tax free cash from the s32 policy what do you have to do with the rest of the pension? Do you have to buy an annuity then and there or can you transfer the rest of the pension out to another more modern pension and implement your drawdown plan? And if you do the transfer after taking the enhanced tax free cash will they still want you to get the form signed? Maybe not if it was only the enhanced tax free cash which made them ask for it in the first place. If they still want the form signed ask them why given that you have been advised there are no safeguarded benefits in the policy