pension advice - re 25pc tax free

[knowledgesercher]

Hi there

 

I just turned 55 and looking to take upto 25 pc of my pension pot. ( tax free) it seems to be a lot trickier than I thought and was hoping for some tips please.

my current provider (aegon) advised that my plan does not offer 25% tax free and told me to get a financial adviser or go to their site retirready? - I looked on this site and its more confusing

 

all i want to do if possible is take 25pc tax free and leave the rest in a plan so do not have to pay any tax

 

 

Any help is much appreciated

 

thanks!

[Andyorch]

This is known as a drawdown,the pensions industry uses the term to describe accounts where typically most of the money remains invested but where savers can take cash out regularly or as needed.

 

There are different types. “Capped” drawdown limits your withdrawals to protect your capital. “Flexible” drawdown lets you take as much as you want, when you want.

 

You can make regular withdrawals where a part of each withdrawal is my 25pc tax-free allowance.This is another type of drawdown, which the jargon-prone pension industry calls “UFPLS”, standing for “uncrystallised funds pension lump sum”. This is a new type of drawdown, along with the new regime, some providers are still working on it.

 

But some smaller, older insurers may not allow withdrawals from personal pensions, or may limit them severely. Lots of occupational schemes may also not allow them on grounds of cost.

 

The first 25pc will be tax-free and the rest will be taxed in the same way as income (basic rate tax at 20pc and higher rate at 40pc).You can choose either to have the first 25pc of your pot tax-free, or to have 25pc of each withdrawal tax-free. The latter option will be more efficient if your pension investments grow over the course of your retirement.

 

Regards

 

Andy

[honeybee13]

Thread moved to the main pensions forum rather than the media section.

 

HB

[knowledgesercher]

Thanks Andy

 

So if I can transfer my plan to one that offers flexi drawdown income, I can withdraw upto 25pc tax free and leave the rest invested?

 

I'm not sure but it looks as though Aviva are allowing customers to set this up without a financial adviser?

 

Thanks again

[Andyorch]

As stated above depends on the company...cant really see a problem though.

 

Andy

[ericsbrother]

No, it doesnt work like that, what happens is that 25% of what you do withdraw is tax free and you pay income tax on the remaining 75%. so, withdraw a portion of your pension pot and you pay tax on 75% of what you take out and the rest sits there as before not attracting a tax liability until you cash it in or take an annuity. Many pension co's dont do drawdown so you have to cash in the lot and reinvest elsewhere. You may be able to transfer the lot to another scheme that does allow drawdown if your current scheme is in the same pensions club. Basically most pension schemes are so that is easy enough but will attract fees for doing so.

If you dont desperately need the money now leave it where it is unless it is a real dog of a scheme and in that case transfer out into another scheme. You cannot get a tax free return anywhere near what you should be getting in a unit based scheme if you convert to cash and the gains in the pension are income and capital gains tax free.