Section 32 pension about to close - what to do?

Blackavar · 18 July 2019 at 11:01PM

Hi
I have section 32 pension (old work pension) now with Aegon that is due to compete at the end of July. It has £80K in it but has a massive benefit of 60% of tax free cash.
I was initially just going to move it to a SIPP but only just realised the tax free element.
My plan was to withdraw the tax free cash and put into our S&S Isas and use the rest as top up cash and maybe move the remainder to a SIPP.
Having had a few fairly difficult discussions with Aegon, It seems that if I do nothing, it is converted to a cash account until I decide what to do with it.
Went to an IFA who strongly recommended keeping this pot with Aegon and transferring to a different Aegon product (unspecified) where it would remain invested and could grow, therefor increasing the tax free element. The Aegon guy confirmed that the big tax free cash element would remain in place as long as this pot remained with Aegon on the phone while with IFA. (no idea how this works).
We are fortunately fairly cash rich so keen to keep money invested as long as possible (me not Mrs - what if we lose it all).
Both retired so no income. My SP kicks next May, hers 10 years later

Any thoughts/advice/info greatly appreciated.

jamesd · 19 July 2019 at 1:26AM

Initially I'm inclined to agree that keeping it with Aegon to preserve the 60% is best.

Are you both fully using your ISA allowances each year? If not, taking the 60% to fund that would be my inclination.

Are you both making gross pension contributions of 3600 a year? 720 each in tax gain if you have 2700 of income tax personal allowance available, dropping to 180 if the whole taxable 2700 is taxed at basic rate.

But we don't know enough about your whole household situation to make properly informed comments. Other investments, lifetime allowance situation, inheritance plans (pension often beats ISA).

The grow the tax free part by leaving it in the pension argument is largely bogus. Take it, invest in the same things inside the ISA and it grows the tax free amount by the same amount. And ISA costs tend to be lower than pension costs so being a little better off is more likely.

Dox · 19 July 2019 at 12:06PM

Not sure what your question is. If you want to keep the tax free element (and you seem to do so), keep it where it is. You have an IFA; listen to their advice, based on a full understanding of your circumstances. A few sentences on a public forum isn't nearly enough to chip in any erudite thoughts!

Might be an idea to clarify what the 'other' Aegon product is and 'find out how [this] works' before you do anything.

wjr4 · 19 July 2019 at 12:24PM

Aegon allow you to take the protected PCLS and invest the remainder in a drawdown product with ARC (Aegon Retirement Choices).

1) Do you need the PCLS? If you are cash rich, I assume not. Keep the pension invested in their drawdown product (this allows you to keep the protected PCLS - I have done this for a client before).
2) Pensions are usually outside of your estate for IHT purposes so please do not withdraw money if you have cash savings elsewhere. It's bad advice to use the PCLS to use your ISA allowance if you already have an IHT issue. If anything, you should be putting money INTO the pension, not withdrawing it - your beneficiaries will appreciate this!

jamesd · 20 July 2019 at 12:51AM

wjr4 wrote: »

It's bad advice to use the PCLS to use your ISA allowance if you already have an IHT issue. If anything, you should be putting money INTO the pension, not withdrawing it - your beneficiaries will appreciate this!

That's too definitive, since say ISA and lifetime giving can be more tax efficient than leaving the money in the pension and dying aged 75 or older.

wjr4 will know this but for others, inherited pension money can be taken tax free in arbitrary amounts if death is before age 75. From 75 the money is taxable income when withdrawn by the beneficiary. Gifts while alive are either free of all tax (gifts up to limits or out of income without impacting giver lifestyle) or free of immediate tax but "potentially exempt transfers" subject to some degree of inheritance tax if death is within seven years.

Which is why I wrote "inheritance plans (pension often beats ISA)" as a caveat where we'd need more information to do a good job.

Normally I favour lifetime giving: recipients are likely to derive more benefit from money at younger ages and the giver gets to see and enjoy that improvement.

Blackavar · 20 July 2019 at 10:46PM

Thanks to all on for input. Perfect advice from wjr4. I'm sure this is the way to go to preserve the large tax free element and remain invested.
Having spoken to Aegon on a few occasions it seems that the call centre people really dislike dealing with individual investors and just want to take instruction from a FA. I have been all over their website for a long time and am struggling to understand the difference between the ARC and Retireready product. All I get out of Aegon is that I need to talk to an FA. Any input gratefully recieved.

xylophone · 21 July 2019 at 12:42AM

All I get out of Aegon is that I need to talk to an FA.

But you already have? Post 1

Went to an IFA

Blackavar · 21 July 2019 at 9:47AM

Yes I have had meeting with IFA. He was unsure of how these 2 Aegon products differ. I was just hoping that a helpful soul who knew of these products could indicate what the key difference is. Thanks.

xylophone · 21 July 2019 at 11:19AM

https://comparetheplatform.com/bonnet-aegons-retiready/

https://www.aegon.co.uk/content/dam/ukpaw/documents/your-guide-to-Aegon-Retirement-Choices.pdf

Does the above help?

Blackavar · 21 July 2019 at 7:41PM

Yes, thanks that’s really helpful. Sadly it looks like both products are designed for FA’s to run on behalf of clients. Nightmare. It seems that the only way that I can Have any influence over this is to move the pot into a SIPP and forgo the opportunity of tax free cash.

xylophone · 21 July 2019 at 11:53PM

Could you not take the 60% PCLS and then transfer the remainder to another of the pensions that you appear (from other posts) to have available?

Or transfer the remainder to the SIPP which you had originally planned to open?

You might then contribute £2880 to the SIPP (as could your wife to her own SIPP), fill an ISA for each of you and use the balance for day to day living instead of taking UFPLS from one of your existing pots?

Section 32 pension about to close - what to do?

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