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Routeman
Posted: 01 February 2011 11:45:53(UTC)
#24

Joined: 18/08/2009(UTC)
Posts: 5
David,

I think I understand where you are coming from in your reply to Nick (don't draw down too much and leave yourself without sufficient income in later years). But on the other side of the coin I have the concern that given the rules, one cannot draw down all of the draw-down fund before death - I have done a spreadsheet and it appears that it is very likely one would leave of the order of 10 - 20% of the fund behind, even if death occurs well into the 90s. With the old rules the situation is similar but the amount left behind most likely lower. One of the reasons as far as I understand is that at 75 and older your drawdown is governed by the rate for 75+ and does not increase as you get older, thus limiting the possible drawdown in these later years. Perhaps drawdown till near 75 and then an annuity might be the best compromise. If the above situation is correct then the approach of getting out as much as possible as soon as possible might be good, PROVIDED that one has suffiicient other income for later years?????

Do I understand this correctly and in you experience is it common for draw-down pensioners to leave funds behind even if living to a ripe old age?
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Chris Wilson
Posted: 01 February 2011 12:14:38(UTC)
#25

Joined: 29/04/2010(UTC)
Posts: 1
Can I get your opinion / advice on the following scenario please:-

Current Age - 74 will be 75 in March 2011.
Not yet taken tax free cash. Does this have to be taken when client reaches age 75 as this is before the introduction of the new finance bill or are there any transitional rules?.

Have tried looking around for answers but nothing is clear yet!
Thanks
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David Trenner - Intelligent Pensions
Posted: 01 February 2011 12:40:35(UTC)
#26

Joined: 27/01/2009(UTC)
Posts: 24
Chris

As I quoted above:

"For the avoidance of doubt, provided the member becomes entitled to a pension commencement lump sum before reaching the age of 75 it can be paid after age 75 so long as it is paid within 12 months of their becoming entitled to it."

But it is almost certain that anyone reaching 75 before 6 April will be covered by the 22 June 2010 rules and will not be able to
defer cash indefinitely.

Routeman

Under the present rules for ASP maximum income is 90% of the GAD rate for someone of 75. However from April it will increase to 100% of GAD based on actual age, which will be higher unless the fund has fallen..
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Darrener
Posted: 01 February 2011 17:38:23(UTC)
#27

Joined: 13/10/2009(UTC)
Posts: 13
Routeman

As I understand it the GAD tables, which up to now have had an age 75 cut-off, will be extended once the legislation is enacted, making it less likely that your drawdown will be reduced. I'm not planning to run down my SIPP pot but hope to pass on a large chunk to my younger wife, who will inherit it with no tax liabilities.
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chazza
Posted: 02 February 2011 16:22:26(UTC)
#28

Joined: 13/08/2010(UTC)
Posts: 606
Have i understood this correctly?
If I have other pension income of over £20,000 p.a., then I will not only be able to take 25% of my SIPP as a tax-free lumpsum, but will be able, immediately, to take the whole of the remaining 75% as drawdown, paying income tax on that my highest marginal rate, but thereby exhausting the SIPP pension pot?
It is more likely that I will choose to drawdown over a period of several years, so as to avoid higher rates of income tax, but it would be nice to be clear about what will be possible before I commit more funds to a SIPP in current year.
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John Smith
Posted: 03 February 2011 20:06:50(UTC)
#29

Joined: 05/04/2010(UTC)
Posts: 2
My situation is.
1) I have currently @£200k in a SIPP.
2) It is likely that at age 65 next year I will have MIR of £20k.
3) I am married with a wife 5yrs younger.
4) I have other assets so it is unlikely though not impossible that I will want the SIPP to live on.
5) At the present time Annuity rates and by extension GAD rates are not attractive.

My options therefore appear to be to:
a) Take no benefits from the SIPP and allow it to pass to my wife on my death. If I die before the age of 75 the full £200k would be received, but if I survive beyond 75 she would receive only £90K after the 55% tax take.
b) Use the new regulations to take £50k tax free at age 65 and attempt to exhaust the remaining fund prior to my death at a tax rate of 20% or 40%. In this scenario I might receive £155K by age 75 and my further survival would have no detrimental effect.
The dilemma appears to be that at age 65 I have to guess if I will die before the age of 75, in which case the former option offers by far the greater return or if I will survive beyond that age so that the latter option would be best.

Is my understanding correct, and if so is this dilemma what the legislators intended?

David Trenner’s previous answers have been most enlightening.
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David Trenner - Intelligent Pensions
Posted: 07 February 2011 10:57:46(UTC)
#30

Joined: 27/01/2009(UTC)
Posts: 24
Chazza, You are correct. It seems unlikely that anyone with a significant fund will want to pay 50% tax to withdraw it all, but it will certainly be possible to take sufficient income to keep you as a 20%/40% taxpayer. It will also be attractive to people using phased drawdown as they will be able to avoid vesting new segments, thereby triggering a 55% tax charge on death.

John, In general terms your understanding is correct. Because you will qualify for the MIR I think you can leave any decision until 70 or even 71, 72. If you are in good health then you can take your tax free cash and take flexible withdrawals which keep you below 50% tax. You will probably continue withdrawals after you are 75, and if you fall ill you can increase the withdrawals to empty the fund. One word of warning: If you take a withdrawal just before dying it will still be in your estate and subject to IHT. It is likely that if you have a significant estate you will need to take advice on how best to minimise all taxes.
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Anonymous Post
Posted: 07 February 2011 13:28:19(UTC)
#31
Anonymous 2 needed this 'Off the Record'

Hi guys
Don't forget "scheme pension" which depending on your age, state of health etc could produce an income greater than 100% GAD
Scheme pension also qualifys as MIR
Most SIPP providers do not offer scheme pension
Might be an idea to check with your current SIPP provider if they do
Scheme pension might not be for you but if your plan doesn't have the option then you don't have the choice
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Mark Percy
Posted: 08 February 2011 15:57:24(UTC)
#32

Joined: 08/02/2011(UTC)
Posts: 1
Hi, can any one answer this question?

If you go into partial draw down now, before 5 April 2011. Can you draw down further benefits after 6 April 2011 and still be on 120% GAD as the review period is still set for five years?

I my mind, I thought that another crystallisaton event would spark a review of the previously crystallised benefits which means the whole lot would then be on the new basis.

It seems that this is a bit of a grey area and I would appreciate if anyone can confirm this, and if possible say where you got your answer from?

Thanks
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NICK GREENWOOD
Posted: 09 February 2011 10:50:57(UTC)
#33

Joined: 07/07/2010(UTC)
Posts: 4
DAVID

Sorry to bother you again, but...

My Review is in Apr'11 and I understand I will then be embarked on a 3yr passage to my next Review.

If I see interest rates rising, could I ask for another review in Apr'12 . Other than the retreat to the 100% multiplier, it is these damnably low rates that is limiting my drawdown income!
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