Pension question

J

jaraarrow

Winger
Just turned 55 and have 2 workplace pensions that I can access if I want to .
One pension is much bigger than the other and has grown 23 per cent in the last year,the other is smaller and has 5 per cent growth in the same period
Was thinking of accessing one of them with partial pension encashment option to treat the family to a nice holiday abroad,so basically taking my 25 per cent tax free in smaller parts but leaving the rest invested still to grow.
Which one would be the best pension to access?
 


jaraarrow said:
Just turned 55 and have 2 workplace pensions that I can access if I want to .
One pension is much bigger than the other and has grown 23 per cent in the last year,the other is smaller and has 5 per cent growth in the same period
Was thinking of accessing one of them with partial pension encashment option to treat the family to a nice holiday abroad,so basically taking my 25 per cent tax free in smaller parts but leaving the rest invested still to grow.
Which one would be the best pension to access?
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I may be way off with this but I though the providers had to give you access to an advisor before making a decision. I think when you access the fund you can chose to reinvest the undrawn element.

Not aimed at the OP - For anyone thinking about it, if you are on any benefits like tax credit, the money transferred into saving can mess it up.
 
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rokerexile said:
Be careful. I'm no expert but I think you have to take your tax free portion in one lump or else the residue after your first withdrawal then becomes taxable. Get some proper advice!
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I don’t believe it has to be taken in one lump, certainly that’s advice I got from a few pension advisers.
 
AyeAyeAye said:
I don’t believe it has to be taken in one lump, certainly that’s advice I got from a few pension advisers.
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I think you take the tax free lump sum and then arrange for a alternative product for the remainder, like an annuity or another pension product. I'm sure the provider have to appoint you an advisor before you take it?
 
Wild Card said:
I may be way off with this but I though the providers had to give you access to an advisor before making a decision. I think when you access the fund you can chose to reinvest the undrawn element.

Not aimed at the OP - For anyone thinking about it, if you are on any benefits like tax credit, the money transferred into saving can mess it up.
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rokerexile said:
Be careful. I'm no expert but I think you have to take your tax free portion in one lump or else the residue after your first withdrawal then becomes taxable. Get some proper advice!
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Yea but for eg I have 100000 in my pot if I take 25 per cent tax free that leaves 75000 subject to tax
If I take it in smaller parts ie move 10000 into drawdown that leaves 90000 still invested to grow over the next few years so for eg the 90000 could be back up to 100000 this time next year
Also checked both pension schemes and spoke to them and they said they would recommend and advisor but ultimately it’s up to me
Also I have checked and can use the ppe option on both
 
Wild Card said:
I think you take the tax free lump sum and then arrange for an alternative product for the remainder, like an annuity or another pension product. I'm sure the provider have to appoint you an advisor before you take it?
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I was trying to get across that you don’t need to take the 25% tax free in one huge lump. You can take it as an income, say £2k pm until the tax free portion runs out. Then it becomes taxable. E.G if your tax free amount is £100k you can withdraw £2k for 50 months before you start paying tax on future withdrawals. That’s the advice I’ve had recently from a few pension advisers.
 
jaraarrow said:
Yea but for eg I have 100000 in my pot if I take 25 per cent tax free that leaves 75000 subject to tax
If I take it in smaller parts ie move 10000 into drawdown that leaves 90000 still invested to grow over the next few years so for eg the 90000 could be back up to 100000 this time next year
Also checked both pension schemes and spoke to them and they said they would recommend and advisor but ultimately it’s up to me
Also I have checked and can use the ppe option on both
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yeah the 90k would be split into crystallised and uncrystallised once you have taken 1st lump. So if you have 100k take 10 tax free - you would then have 30k in crystallised (which will be subject to tax limits once you touch it) and 60k in uncrystallised which can grow and you can still take 25% of this

if it grew to say 40/80 (from 30/60) in a few years you can take up to 20k from uncrystallised
 
Beery said:
yeah the 90k would be split into crystallised and uncrystallised once you have taken 1st lump. So if you have 100k take 10 tax free - you would then have 30k in crystallised (which will be subject to tax limits once you touch it) and 60k in uncrystallised which can grow and you can still take 25% of this

if it grew to say 40/80 (from 30/60) in a few years you can take up to 20k from uncrystallised
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So 1 3rd would be subject to tax and 2 3rds not ?
 
jaraarrow said:
Yea but for eg I have 100000 in my pot if I take 25 per cent tax free that leaves 75000 subject to tax
If I take it in smaller parts ie move 10000 into drawdown that leaves 90000 still invested to grow over the next few years so for eg the 90000 could be back up to 100000 this time next year
Also checked both pension schemes and spoke to them and they said they would recommend and advisor but ultimately it’s up to me
Also I have checked and can use the ppe option on both
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You appear to know more about it than me but doesn't that mean you're then only getting 10% of your pension tax free? My understanding is that you can only take the lumper once so you need to take the whole 25% or lose the benefit. However, I could be wrong and I'm sure you're on top of it.

Edit: Looking at other posts it appears that it's much more nuanced than I thought so I'll butt out!
 
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rokerexile said:
You appear to know more about it than me but doesn't that mean you're then only getting 10% of your pension tax free? My understanding is that you can only take the lumper once so you need to take the whole 25% or lose the benefit. However, I could be wrong and I'm sure you're on top of it.
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The way I understand it is that with partial pension encashment ,every time you access your pension the lump sum you take out 25 per cent is tax free but the rest subject to tax
But this way it could grow back to its original value if left invested so you could do the same in lets say a years time
 
jaraarrow said:
The way I understand it is that with partial pension encashment ,every time you access your pension the lump sum you take out 25 per cent is tax free but the rest subject to tax
But this way it could grow back to its original value if left invested so you could do the same in lets say a years time
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The puzzle I’m trying to get around is which one to access if I choose to do so
 
Wild Card said:
I think you take the tax free lump sum and then arrange for a alternative product for the remainder, like an annuity or another pension product. I'm sure the provider have to appoint you an advisor before you take it?
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Yeah, I think that is correct. You don't have to take 25% all at once. How tricky, or not it is to take in tranches, I have no idea. I normally only see it from the tax perspective.
 
buster said:
Take professional advice is the best advice I’ve seen in this and other pension threads.
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This, there's all sorts of twists and turns...that baffle me.

You could be better off taking some and paying tax on it now.. DEPENDING on your financial situation now and requirements in the future. My advisor has tried to explain drawdown to me, but I glaze over and just stare at him. It's all if, ands and buts. God help me (and him), when I'm looking to use mine,!
 
jaraarrow said:
The puzzle I’m trying to get around is which one to access if I choose to do so
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Only you can decide that. Remember as well if you're still working if you access the taxable part of crystallised funds you'll trigger the MPAA.
Anyone wanting to understand drawdown without just taking the 'full' 25% straight away watch this video I've linked to before
Note the figures he uses for annual allowance and MPAA are out of date
 
jaraarrow said:
Just turned 55 and have 2 workplace pensions that I can access if I want to .
One pension is much bigger than the other and has grown 23 per cent in the last year,the other is smaller and has 5 per cent growth in the same period
Was thinking of accessing one of them with partial pension encashment option to treat the family to a nice holiday abroad,so basically taking my 25 per cent tax free in smaller parts but leaving the rest invested still to grow.
Which one would be the best pension to access?
Click to expand...
Depends on how old they are and if they are defined benefits or defined contributions. My financial advisor confirmed to me that the old workplace pension/s I had that were ‘final salary’ based and benefited from annual RPI related increases would be ‘the backbone of my pension arrangements’. He wasn’t wrong. If I hadn’t held on to the pension I’d paid into for 10 years from 1988, I’d be dipping into the private pension fund I established afterwards to a considerably larger degree.

So take independent financial advice is my response. As it always is when this kind of thread appears.
 
BiG said:
Depends on how old they are and if they are defined benefits or defined contributions. My financial advisor confirmed to me that the old workplace pension/s I had that were ‘final salary’ based and benefited from annual RPI related increases would be ‘the backbone of my pension arrangements’. He wasn’t wrong. If I hadn’t held on to the pension I’d paid into for 10 years from 1988, I’d be dipping into the private pension fund I established afterwards to a considerably larger degree.

So take independent financial advice is my response. As it always is when this kind of thread appears.
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Must be DC I've never heard of a DB where you can take the tax free element in dribs and drabs 👍
 
BiG said:
Depends on how old they are and if they are defined benefits or defined contributions. My financial advisor confirmed to me that the old workplace pension/s I had that were ‘final salary’ based and benefited from annual RPI related increases would be ‘the backbone of my pension arrangements’. He wasn’t wrong. If I hadn’t held on to the pension I’d paid into for 10 years from 1988, I’d be dipping into the private pension fund I established afterwards to a considerably larger degree.

So take independent financial advice is my response. As it always is when this kind of thread appears.
Click to expand...
Yea they are dc pensions
 

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