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  • FIRST POST
    • daisyrose
    • By daisyrose 3rd Oct 19, 2:04 PM
    • 125Posts
    • 15Thanks
    daisyrose
    Still confused.
    • #1
    • 3rd Oct 19, 2:04 PM
    Still confused. 3rd Oct 19 at 2:04 PM
    I have been reading all that I can but its just confused me more. I am interested in your views and decisions and have a few questions.

    Is there an option to change providers when in drawdown or would it be costly?

    Take the tfls or leave it invested in the pension?

    Are there any rules for taking the tfls later after drawdown has started?

    Take 4% of drawdown and pay tax or take 3% and not pay tax?
Page 1
    • MarkCarnage
    • By MarkCarnage 3rd Oct 19, 2:21 PM
    • 132 Posts
    • 93 Thanks
    MarkCarnage
    • #2
    • 3rd Oct 19, 2:21 PM
    • #2
    • 3rd Oct 19, 2:21 PM
    I have been reading all that I can but its just confused me more. I am interested in your views and decisions and have a few questions.

    Is there an option to change providers when in drawdown or would it be costly?

    Yes, and it shouldn't be.

    Take the tfls or leave it invested in the pension?

    A personal choice depending on circumstances, but you don't need to take it all in one go, you can phase it into drawdown and take a tranche of TFLS each time. This link explains it quite well I think
    https://www.youinvest.co.uk/pensions-and-retirement/accessing-your-pension/tax-free-cash

    Are there any rules for taking the tfls later after drawdown has started?

    My understanding is that once you've moved a tranche into drawdown, you can't take TFLS from that portion, unless you do it at outset.

    Take 4% of drawdown and pay tax or take 3% and not pay tax?
    Originally posted by daisyrose
    Not sure what you are meaning here? Presumably in your case, taking 4% of your drawdown 'pot' would take you over your personal allowance but 3% would not? All income withdrawals from drawdown are taxable at the recipient's marginal rate, which might be 0% or 45%.

    Responses above. Some of the questions are quite hard to answer without knowing specific circumstances.
    • Linton
    • By Linton 3rd Oct 19, 2:22 PM
    • 11,400 Posts
    • 11,831 Thanks
    Linton
    • #3
    • 3rd Oct 19, 2:22 PM
    • #3
    • 3rd Oct 19, 2:22 PM
    I have been reading all that I can but its just confused me more. I am interested in your views and decisions and have a few questions.

    Is there an option to change providers when in drawdown or would it be costly?
    Originally posted by daisyrose

    You can change providers when in drawdown, and there may be a relatively small charge to cover the costs. Sometimes the receiving SIPP may pay the costs.

    Take the tfls or leave it invested in the pension?
    You can take the TFLS or leave it invested. But see the next answers...


    Are there any rules for taking the tfls later after drawdown has started?
    You cannot take any taxable money before you have taken the corresponding TFLS. So if you had a 100K pot and had not taken the TFLS you could not take a fully taxable drawdown payment. If you had taken 10K of the tax free 25K you could take up to 30K of taxed money.


    To be pedantic I believe you could take taxable money but then you loose the right to the tax free amount, so its not a very good idea.

    Take 4% of drawdown and pay tax or take 3% and not pay tax?
    No - any taxable payments from a pension go through PAYE. For example if your pension pot is 100K and you wanted to withdraw 4K, you could take the 25K tax free and then a subsequent 4k would be taxed or you do have the option to include the TFLS in each drawdown. For example, if you have never taken the TFLS you could withdraw 4K, 1K of which would be tax free and 3K would be taxed. This latter option is known as UFPLS.
    • Albermarle
    • By Albermarle 3rd Oct 19, 5:24 PM
    • 1,770 Posts
    • 1,135 Thanks
    Albermarle
    • #4
    • 3rd Oct 19, 5:24 PM
    • #4
    • 3rd Oct 19, 5:24 PM
    Is there an option to change providers when in drawdown or would it be costly?
    As said should be OK but I know from my SIPP provider you can not transfer a pension in drawdown online - you have to talk to them and there is a minimum transfer amount . So will be some variation from provider to provider so you would have to do some research.
    Take the tfls or leave it invested in the pension?
    The professionals on the forum usually say if you don't need it leave it where it is, but not everyone agrees . The main point is do not withdraw it and then wonder what to do with it .
    • daisyrose
    • By daisyrose 3rd Oct 19, 6:38 PM
    • 125 Posts
    • 15 Thanks
    daisyrose
    • #5
    • 3rd Oct 19, 6:38 PM
    • #5
    • 3rd Oct 19, 6:38 PM
    Thank you. More reading but it was helpful thank you. After your replies I have realised that I'm not as confused as I thought but just can't decide on the best way to start taking the pension.

    The position is that its time to take the pension and we now need the income but find it difficult to decide which way to do it. The flavoured option is or was to take the 25% tfls and start a monthly drawdown equating to around 3500 p.a and to use the tfls as a pension top up but where to invest it is also a problem for me. This would bring total income to just under the personal tax allowance. I have no problem paying tax so I was wondering if taking around 4000 p.a. would make much of a difference cost and pension wise.I want to take the best option to maximize the returns taking into account any sipp charges and tax to be paid.
    I thought that I read that UFPLS was not always a good option so I think that I have decided against it.
    • Linton
    • By Linton 3rd Oct 19, 6:54 PM
    • 11,400 Posts
    • 11,831 Thanks
    Linton
    • #6
    • 3rd Oct 19, 6:54 PM
    • #6
    • 3rd Oct 19, 6:54 PM
    Thank you. More reading but it was helpful thank you. After your replies I have realised that I'm not as confused as I thought but just can't decide on the best way to start taking the pension.

    The position is that its time to take the pension and we now need the income but find it difficult to decide which way to do it. The flavoured option is or was to take the 25% tfls and start a monthly drawdown equating to around 3500 p.a and to use the tfls as a pension top up but where to invest it is also a problem for me. This would bring total income to just under the personal tax allowance. I have no problem paying tax so I was wondering if taking around 4000 p.a. would make much of a difference cost and pension wise.I want to take the best option to maximize the returns taking into account any sipp charges and tax to be paid.
    I thought that I read that UFPLS was not always a good option so I think that I have decided against it.
    Originally posted by daisyrose

    If you need a cash lump sum such as for an emergency fund or cash buffer and dont have one then taking the TFLS would seem to be a good idea. Otherwise taking your pension under UFPLS would give you the option of a larger drawdown without paying tax.


    Whether you should take 4K/year rather than 3500 depends on the size of your pension pot - the size of the pot required is proportional to the drawdown so a 4K drawdown would imply a 15% higher minimum pot size. If you are well within sensible drawdown limits then that isnt an issue. Maximum tax efficiency is achieved if you can just match your tax allowance putting any unused income into an S&S ISA. If you have to go over the limit anyway because of other income then it doesnt matter.
    • daisyrose
    • By daisyrose 3rd Oct 19, 7:53 PM
    • 125 Posts
    • 15 Thanks
    daisyrose
    • #7
    • 3rd Oct 19, 7:53 PM
    • #7
    • 3rd Oct 19, 7:53 PM
    I don't have any immediate need for the tfls. My thinking is to use it as a pension top up but also as a bit of protection that if the value of the sipp fell a lot the tfls would be safe out of the sipp but of course as a S & S isa would not be and you never know if you might have a use for it in the future. Also I am thinking about keeping charges to a minimum. Is UPFLS a good option?
    • IanSt
    • By IanSt 4th Oct 19, 10:22 AM
    • 363 Posts
    • 273 Thanks
    IanSt
    • #8
    • 4th Oct 19, 10:22 AM
    • #8
    • 4th Oct 19, 10:22 AM
    Also I am thinking about keeping charges to a minimum. Is UPFLS a good option?
    Originally posted by daisyrose
    Well that depends on which provider/company it is with, how much you have in there and also how frequently you want to take money out.

    For me, UFPLS is the best and cheapest way to draw out my money from my main pension, but that is not to say that it would be for you.

    There have been various posts in this forum about the costs of running a pension, so I'd advise you to take a look at those. Though keep in mind that many of those posts concentrate on the accumulation part of building up a pension and those costs rather than when you are in the drawdown of income stage.
    • Albermarle
    • By Albermarle 4th Oct 19, 12:10 PM
    • 1,770 Posts
    • 1,135 Thanks
    Albermarle
    • #9
    • 4th Oct 19, 12:10 PM
    • #9
    • 4th Oct 19, 12:10 PM
    Some providers allow you to take the TFLS in stages .
    So for example if you had a pot of 100K . You can crystallise 20K . Take 5K as tax free and 15K goes into drawdown , to be taken as taxable income in stages either at the same time or later.
    Then do the same again later .
    It is similar to UFPLS except that it can give a bit more flexibility as you are not forced to take the taxable income at the same time as the tax free income .
    Phased flexi access drawdown I think is the correct name . Not possible with every provider as far as I know.
    • AnotherJoe
    • By AnotherJoe 4th Oct 19, 1:08 PM
    • 16,272 Posts
    • 19,527 Thanks
    AnotherJoe
    Thank you. More reading but it was helpful thank you. After your replies I have realised that I'm not as confused as I thought but just can't decide on the best way to start taking the pension.

    The position is that its time to take the pension and we now need the income but find it difficult to decide which way to do it. The flavoured (cherry? ) option is or was to take the 25% tfls and start a monthly drawdown equating to around 3500 p.a and to use the tfls as a pension top up but where to invest it is also a problem for me.
    Then not doing that would seem to be a good idea !

    This would bring total income to just under the personal tax allowance. I have no problem paying tax so I was wondering if taking around 4000 p.a. would make much of a difference cost and pension wise.I want to take the best option to maximize the returns taking into account any sipp charges and tax to be paid.
    I thought that I read that UFPLS was not always a good option so I think that I have decided against it.
    Originally posted by daisyrose

    If its not always a good option, that means it sometimes it is. Right?
    So, get over your initially misplaced decision that because its sometimes not the best that means its always not the best, and look at whats best for you.
    If you dont need and dont know what to do with the TFLS then UFPLS seems to be, on the little info you've given, probably the best decision.
    Are you in receipt of any other pensions currently? What are you living on? How long til SP or other pensions kick in? That will guide what is best in terms of tax.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • daisyrose
    • By daisyrose 7th Oct 19, 3:41 PM
    • 125 Posts
    • 15 Thanks
    daisyrose
    Thank you everyone for your views,explanations and pointing out my typo. It's all a bit taxing for me. We have been living off o/h state pension and very small workplace pension in total about 10k per year topped up with my redundancy as and when required.
    I have to look at all of the options more thoroughly than I have and then make the decision. I can feel a HOW coming along!
    • daisyrose
    • By daisyrose 18th Oct 19, 3:02 PM
    • 125 Posts
    • 15 Thanks
    daisyrose
    Still confused and another question!
    Drawdown is a lot clearer now Thanks to all of your comments and links we think that we have decided to leave the tfls invested in the pension because we're not sure what to do with it for the best return and to move to flexi drawdown.
    The reason for taking the tfls was to reduce fees which would be 2.6%. This includes 0.75% I F A fee.
    I asked if these fees were high in another post and it seems that they are. I'm not confident about taking care of the pension myself so need the IFA to look after it.
    Leaving the tfls will increase the charges and erode the pension even more. The fund rose by approx 4% in the past year.
    I thought that I have read that between 3 and 5% per year is an amount to take from the pot. So if this is correct it's not good or am I looking at this the wrong way?
    Can I please have your thoughts and comments?
    • Andrew31
    • By Andrew31 18th Oct 19, 3:15 PM
    • 7 Posts
    • 9 Thanks
    Andrew31
    If you are paying an IFA fee, would your adviser not help you decide what is best, after all that is what you are paying for?
    • daisyrose
    • By daisyrose 18th Oct 19, 10:06 PM
    • 125 Posts
    • 15 Thanks
    daisyrose
    The IFA told us what our options are but the decision of how much we need for drawdown will be ours. When trying to make that decision I started to think about what % to drawdown and the effect of the charges on the pension.
    • Albermarle
    • By Albermarle 19th Oct 19, 11:24 AM
    • 1,770 Posts
    • 1,135 Thanks
    Albermarle
    fees which would be 2.6%. This includes 0.75% I F A fee.
    An IFA fee of 0.75% is not unreasonable for a medium sized pot . However if your total fees are 2.6% then the actual cost of the pension and funds is 1.85%, which is high .
    Something more in the region of 0.5% to 1.0% max would be more normal , so giving total charges of around 1.5% .
    You need to approach your IFA for an explanation of why you are paying so much for your pension and that you want it to be reduced .
    I thought that I have read that between 3 and 5% per year is an amount to take from the pot
    Yes it is thought that a 3% withd rawal rate is a safe option , meaning that your money only has a small chance of running out before you are very old .
    4% increases the chances of your money running out if you leave to a very ripe old age but is still a relatively safe %
    As you increase the % above that the risk of running out of money increases significantly . 5% is not a crazy figure and probably you would still be OK but anything above that is definitely not recommended.
    If you go for the higher % it helps to have a separate cash pot so you can reduce pension with drawals during times of market downturn .
    • daisyrose
    • By daisyrose 20th Oct 19, 4:39 PM
    • 125 Posts
    • 15 Thanks
    daisyrose
    Thank you Albermarle for explaining this so well for me.
    I am ok with the IFA fee and I will query the fund charges. Are they likely to reduce their charge? I think that they are quoted in the terms and conditions.
    The Platform wrap charge, PEAS = 0.4% up to 99,999.
    The plan charges are:
    Annual admin charge 524,
    Annual pension fund withdrawal charge 158.
    All of the charges are average. I suppose that means that they change with the fund value.
    Is there any particular charge that is excessive or should I query the whole amount of 1.85%?
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