Anyone up to speed on new UK Pension rules ?

[brio]

Hi Everyone,

I hope some of you that are up to speed on the new pensions regs can help me....

I have a small UK pension that i can take in May 2015, when i am 55...

Its only a small amount, circa 20,000 GBP.

I've read that new rules that come into force in April 2015 state that you no longer need to buy an annuity, and can take the whole fund in cash, which is what i want to do.

i've not lived in the UK for 10 years (lived in Thailand), have no property or assets there and have no earnings / income there....

so my question is - if i want to take the 20,000 GBP what tax deductions will the insurance company take and what am i likely to actually receive ?

i understand that 25% is tax free and that i'd have a 10,000 gbp allowance before paying tax. Also i'm married (English Wife) and i understand that there is a married man's allowance of 3,140 gbp....

if i tell the insurance company that i don't live in the uk (and thus not a UK tax payer) will they pay me gross as a "non tax payer" or will the amount be paid to me net of tax and i'll need to complete a tax return to get it back in the next tax year ??

Any advice would be of great assistance.

[RolandRat]

Try the home country forum, up-to date etc there

http://www.thaivisa.com/forum/forum/197-home-country-forum/

Edited October 29, 2014 by RolandRat

[Jip99]

Unless you transfer into a QROPS (not worth it that amount) you will be subject to UK tax.

There is no married mans allowance, your tax allowance would be £10k.

In theory you can take 25% tax free i.e. £5k, a further £10k covered by your tax allowance, leaving £5k to be taxed at 20% i.e. tax payable £1,000.

I think more opportunities may emerge as we get nearer to April.

[brio]

Unless you transfer into a QROPS (not worth it that amount) you will be subject to UK tax.

There is no married mans allowance, your tax allowance would be £10k.

In theory you can take 25% tax free i.e. £5k, a further £10k covered by your tax allowance, leaving £5k to be taxed at 20% i.e. tax payable £1,000.

I think more opportunities may emerge as we get nearer to April.

thanks for that.........

understand the calcs, but will the pension company pay the 5k tax free and tax the remaining 15k at 20%, giving me leaving me to then full out a tax return and reclaim the tax deducted ?? and if so, how do i go about re-claiming the tax and how long is it likely to take ??

Edited October 29, 2014 by brio

[fletchsmile]

There's some good info and summaries on HL's website if you click around, eg:

http://www.hl.co.uk/pensions/death-tax

https://www.hl.co.uk/free-guides/budget-2014-pension-changes-factsheet

http://www.hl.co.uk/pensions

Cheers

Fletch

[AyG]

Remember that the income tax allowance is for each tax year, so if you cash in over a period of years you will pay no tax.

[rak sa_ngop]

I am arranging to do the same thing but with a larger amount.

I you want to spread the cashing in over two years to benefit from your tax free allowance and thus pay no tax on the 20,000 GBP, you will probably have to transfer your pension plan to another type of fund that allows drawdown. I checked with my pension plan administrator and there is no way to drawdown from my existing plan, i.e. it has to be transferred in total or cashed in (25 pc tax free, the remainder taxed as income). Starting rom 2015 of course.

So then you have to decide if the fees and trouble of transferring your fund is worth it to you. Maybe better to bite the bullet and pay tax which in your case will not be too much.

[BaldPlumber]

I am arranging to do the same thing but with a larger amount.

I you want to spread the cashing in over two years to benefit from your tax free allowance and thus pay no tax on the 20,000 GBP, you will probably have to transfer your pension plan to another type of fund that allows drawdown. I checked with my pension plan administrator and there is no way to drawdown from my existing plan, i.e. it has to be transferred in total or cashed in (25 pc tax free, the remainder taxed as income). Starting rom 2015 of course.

So then you have to decide if the fees and trouble of transferring your fund is worth it to you. Maybe better to bite the bullet and pay tax which in your case will not be too much.

This is incorrect, since a government announcement earlier this month.

Details still to be announced but you should be able to withdraw whatever you want, whenever you want. The second big game changer for UK private pension holders.

Linky

[AyG]

I checked with my pension plan administrator and there is no way to drawdown from my existing plan, i.e. it has to be transferred in total or cashed in (25 pc tax free, the remainder taxed as income). Starting rom 2015 of course.

This is a computer systems issue. I'm pretty sure that firms will be working to add the functionality and it will be available before (or shortly after) the deadline.

[ldnguy]

Are you sure you can get the £10,000 allowance? I think it doesn't count for pension withdrawals like this because when you invested the money it was most likely invested gross. So if you withdraw it, then the whole lot is taxable, apart from the 25%. I might be wrong, but that's the way I understand it.

[BaldPlumber]

Are you sure you can get the £10,000 allowance? I think it doesn't count for pension withdrawals like this because when you invested the money it was most likely invested gross. So if you withdraw it, then the whole lot is taxable, apart from the 25%. I might be wrong, but that's the way I understand it.

Anything above the 25% is taxed at your marginal rate, if the remainder is less than £10K (from April 2015) and this is your only income then it will all be tax free.

Edited November 1, 2014 by BaldPlumber

[meatboy]

is it a private pension or an occupational one? if its the latter you can only take 25% of the total pot and a reduced monthly pension if you take the higher of the 2 lump sums.the 25% lump sum is not taxable.

[rak sa_ngop]

I am arranging to do the same thing but with a larger amount.

I you want to spread the cashing in over two years to benefit from your tax free allowance and thus pay no tax on the 20,000 GBP, you will probably have to transfer your pension plan to another type of fund that allows drawdown. I checked with my pension plan administrator and there is no way to drawdown from my existing plan, i.e. it has to be transferred in total or cashed in (25 pc tax free, the remainder taxed as income). Starting rom 2015 of course.

So then you have to decide if the fees and trouble of transferring your fund is worth it to you. Maybe better to bite the bullet and pay tax which in your case will not be too much.

This is incorrect, since a government announcement earlier this month.

Details still to be announced but you should be able to withdraw whatever you want, whenever you want. The second big game changer for UK private pension holders.

Linky

Interesting what you say. I talked to my Pension Plan provider 3 months ago and a total transfer or an annuity with them were the only options for my existing with-profits plan. To get the 'any amount any time' option I would have to transfer to another fund.

I will check again

[Jip99]

Are you sure you can get the £10,000 allowance? I think it doesn't count for pension withdrawals like this because when you invested the money it was most likely invested gross. So if you withdraw it, then the whole lot is taxable, apart from the 25%. I might be wrong, but that's the way I understand it.

I do not profess to be an expert but my understanding is that "Income Drawdown" is just that .... income. Therefore, it is subject to income tax. If subject to income tax then a personal tax allowance should be available against that income.

I think my opinion is supported by this extract from Aviva:-

How your income is taxed - income you take through income drawdown is taxed in the same way as earned income. We'll deduct Pay As You Earn (PAYE) tax from your pension income before paying it to you

[rak sa_ngop]

I am arranging to do the same thing but with a larger amount.

I you want to spread the cashing in over two years to benefit from your tax free allowance and thus pay no tax on the 20,000 GBP, you will probably have to transfer your pension plan to another type of fund that allows drawdown. I checked with my pension plan administrator and there is no way to drawdown from my existing plan, i.e. it has to be transferred in total or cashed in (25 pc tax free, the remainder taxed as income). Starting rom 2015 of course.

So then you have to decide if the fees and trouble of transferring your fund is worth it to you. Maybe better to bite the bullet and pay tax which in your case will not be too much.

This is incorrect, since a government announcement earlier this month.

Details still to be announced but you should be able to withdraw whatever you want, whenever you want. The second big game changer for UK private pension holders.

Linky

Interesting what you say. I talked to my Pension Plan provider 3 months ago and a total transfer or an annuity with them were the only options for my existing with-profits plan. To get the 'any amount any time' option I would have to transfer to another fund.

I will check again

I have now talked to my private pension provider Guardian Assurance Ltd again and they confirmed what I had been told before.

There is NO option to drawdown from ANY of their policies. The options you have after the age of 55 are to either buy an annuity or transfer the value of the plan to another company/fund (that allows drawdowns). The government cannot instruct companies to offer drawdown options.

My policy consist of fund units (about 30pc of the Transfer Value), and a Terminal Bonus (about 70 pc of the TV). Maybe drawing down units in the plan would jeopardise the Terminal Bonus?

[BaldPlumber]

I am arranging to do the same thing but with a larger amount.

I you want to spread the cashing in over two years to benefit from your tax free allowance and thus pay no tax on the 20,000 GBP, you will probably have to transfer your pension plan to another type of fund that allows drawdown. I checked with my pension plan administrator and there is no way to drawdown from my existing plan, i.e. it has to be transferred in total or cashed in (25 pc tax free, the remainder taxed as income). Starting rom 2015 of course.

So then you have to decide if the fees and trouble of transferring your fund is worth it to you. Maybe better to bite the bullet and pay tax which in your case will not be too much.

This is incorrect, since a government announcement earlier this month.

Details still to be announced but you should be able to withdraw whatever you want, whenever you want. The second big game changer for UK private pension holders.

Linky

Interesting what you say. I talked to my Pension Plan provider 3 months ago and a total transfer or an annuity with them were the only options for my existing with-profits plan. To get the 'any amount any time' option I would have to transfer to another fund.

I will check again

I have now talked to my private pension provider Guardian Assurance Ltd again and they confirmed what I had been told before.

There is NO option to drawdown from ANY of their policies. The options you have after the age of 55 are to either buy an annuity or transfer the value of the plan to another company/fund (that allows drawdowns). The government cannot instruct companies to offer drawdown options.

My policy consist of fund units (about 30pc of the Transfer Value), and a Terminal Bonus (about 70 pc of the TV). Maybe drawing down units in the plan would jeopardise the Terminal Bonus?

I have no idea, I just provided the link. I also have no knowledge whether an act of parliament would be needed or whether pension companies can be forced to comply.

I do know that it would be a huge bonus for me personally should this see the light of day and for many others I would imagine.

[Chivas]

I can give the OP the exact answer to the letter purely because I have been enquiring only this week reference my own situation where I am 55 in March just before new legislations kicks in.

As regards Taxation with HMRC The Insurance Companies have been instructed to take Basic Rate Tax off the Taxable element and for the individual to reclaim any overpaid tax at years end.

Higher rate tax wont apply with the size of your Pot