Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • segovia
    • By segovia 10th Aug 18, 8:17 AM
    • 12Posts
    • 0Thanks
    segovia
    Pension Options
    • #1
    • 10th Aug 18, 8:17 AM
    Pension Options 10th Aug 18 at 8:17 AM
    Hi

    I have a self-employed pension that has been running for over 30 years. During the past few years, I have been able to make some significant lump sum contributions which have eased my tax liability. I am not ready for cashing in yet but maybe in about 2 or 3 years. I know I can buy an annuity and I also know I can take 25% tax-free.

    Assuming I don't go down the annuity route and I take my 25% what are the popular options for the balance of the pot.

    J
Page 1
    • xylophone
    • By xylophone 10th Aug 18, 9:23 AM
    • 27,645 Posts
    • 16,610 Thanks
    xylophone
    • #2
    • 10th Aug 18, 9:23 AM
    • #2
    • 10th Aug 18, 9:23 AM
    You can make an appointment with Pension Wise for an explanation of your options.

    https://www.pensionwise.gov.uk/en
    • dunstonh
    • By dunstonh 10th Aug 18, 10:19 AM
    • 96,058 Posts
    • 63,875 Thanks
    dunstonh
    • #3
    • 10th Aug 18, 10:19 AM
    • #3
    • 10th Aug 18, 10:19 AM
    I am not ready for cashing in yet but maybe in about 2 or 3 years. I know I can buy an annuity and I also know I can take 25% tax-free.
    There are a number of other options as well.

    Pensionwise is your best bet at this stage. However, do note that they will not give advice. They will cover a number of the generic options. They will also not take into account market variations or commercial arrangements. i.e. providers with unique functions/ability or an option that viable when you talk generically but not when you consider the market. However, it is a good starting point.

    I personally find that I am using phased flexi access drawdown the most. However, the stats overall show flexi-access drawdown being the most popular. Although there is a lot of concern that a high number of people are using the wrong method, particularly on the DIY market, and the FCA is looking at ways to address this. So, you need to really ignore what may be "popular". You need to focus on what is right for you.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • segovia
    • By segovia 11th Aug 18, 8:11 AM
    • 12 Posts
    • 0 Thanks
    segovia
    • #4
    • 11th Aug 18, 8:11 AM
    • #4
    • 11th Aug 18, 8:11 AM
    [QUOTE=xylophone;74641417]You can make an appointment with Pension Wise for an explanation of your options.


    Thanks, a good place to start.
    • cfw1994
    • By cfw1994 11th Aug 18, 8:39 AM
    • 211 Posts
    • 99 Thanks
    cfw1994
    • #5
    • 11th Aug 18, 8:39 AM
    • #5
    • 11th Aug 18, 8:39 AM
    I personally find that I am using phased flexi access drawdown the most. However, the stats overall show flexi-access drawdown being the most popular. Although there is a lot of concern that a high number of people are using the wrong method, particularly on the DIY market, and the FCA is looking at ways to address this. So, you need to really ignore what may be "popular". You need to focus on what is right for you.
    Originally posted by dunstonh
    I (think!) I understand “flexi-access drawdown”.....but what do you mean by a “phased” one? (google hasn’t really helped me!)
    Thx!
    • OldMusicGuy
    • By OldMusicGuy 11th Aug 18, 9:48 AM
    • 641 Posts
    • 1,392 Thanks
    OldMusicGuy
    • #6
    • 11th Aug 18, 9:48 AM
    • #6
    • 11th Aug 18, 9:48 AM
    I think the difference is between crystallizing all or part of your pot, at which point you take 25% tax free as a lump and the remainder of the crystallized part is taxable when you take income from it, or taking what they call UFPLS withdrawals where you do not crystallize any part of the pot but take an amount out and 25% of that amount is assumed to be tax free. The risk with the first approach is that the crystallized fund could grow but you have used all of your 25% tax free, whereas with the UFPLS method your total tax free amount could be higher (assuming the fund grows).

    I shall be doing that before my SP kicks in, I will take an UFPLS withdrawal so that I don't pay any tax. This means you can effectively withdraw the personal allowance plus 25% without paying tax. Of course you have to be over 55 to do that (and not receiving other taxable income).

    I think that may be the difference in terminology but TBH I am not familiar with the term phased drawdown either. I hope I haven't missed something....
    Last edited by OldMusicGuy; 11-08-2018 at 9:52 AM.
    • MK62
    • By MK62 11th Aug 18, 9:52 AM
    • 340 Posts
    • 247 Thanks
    MK62
    • #7
    • 11th Aug 18, 9:52 AM
    • #7
    • 11th Aug 18, 9:52 AM
    All it means is that instead of "crystallising" your entire pension fund in one go, you phase the crystallisation over a number of years.....say 25% of the original pot value each year for 4 years, or 20% over 5 yrs...or whatever you like really....and so on

    If the uncystallised pot grows, you can end up with a bit more tax free cash when you do crystallise it (and vice-versa), and it avoids the possible headache of what to do with a large lump sum payment in a single tax year.

    If the pot is small, possible "benefit crystallisation" charges could make a dent though, so you have to weigh things up - but that depends on the platform you are using really.....
    • dunstonh
    • By dunstonh 11th Aug 18, 2:06 PM
    • 96,058 Posts
    • 63,875 Thanks
    dunstonh
    • #8
    • 11th Aug 18, 2:06 PM
    • #8
    • 11th Aug 18, 2:06 PM
    Phased flexi-access drawdown is popular with advisers but seems to be less common with DIY (based only on what i read here). Phased drawdown has existed for over a decade.

    Its mostly covered in the posts above but the most common method is to have the income paid with 25% tax free and 75% taxable. Rather than take the 25% up front. Phasing allows you to have a greater income tax free. Not waste your 25% lump sum if you dont need any money at the start (as its always available to take later). And if you a drawing down an amount that could see the fund value grow, the ability to take a greater tax free lump sum later on.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

395Posts Today

2,404Users online

Martin's Twitter