UK Private Pension - Changes to Pension Laws

[GuestHouse]

This April the UK will relax the laws around how those of us who have private pension pots can access our pension funds.

Headlining the changes is the removal of the obligation to purchase an annuity, we might now leave the pension invested, draw down, take the money and invest/spend .. the options are wide open.

Under the revised rules in force after April a person over the age of 55 can draw up to £10,000 a year tax free from their pension pot. This together with the existing 25% tax free lump sum gives some real flexibility.

A person with a £200,000 pension pot might (after April), take 25% tax free lump sum (£50,000) and then draw down up to £10,000 per year tax free. (All the while holding their pension pot within the well regulated UK financial sector .... no need to risk it with the unregulated 'Financial Advisors in Thailand' ).

It is also not necessary to take the whole of the 25% lump sum in one go - For example, take 10% now, let the pot grow a while and then take another 15% from the now grown pot.

These are significant changes and will give people a whole range of choices they never had - its bound to affect people retiring to Thailand.

So I'm interested to hear if members have thought about this and if so what do they plan to do?

I personally am considering placing an AVC I have into draw down to finance partial retirement - I'll not touch the cash in my main pension funds (Certainly not my final salary fund). I'll use draw down on my defined contribution fund but will not rule out buying and annuity with the residue, perhaps when/ if I reach my 70s.

[The Fat Controller]

For Defined Benefit (Final Salary) pensions, there are no changes, you can still take a tax-free lump sum, up to 25%, but the rest has to be taken as a pension and is not accessible under the April 2015 changes.

The only way to take the whole DB pot would be to transfer the pension to another provider that allows you to take out the money under the new rules, this will obviously involve some charges at the new provider.

My pension scheme (DB) have just written to us all regarding this, and you MUST have independent financial advise before you transfer out, that is in the legislation.

I am in a funded scheme, not government or local authority.

I have been in my pension scheme for 33 years, but looking at the Cash Equivalent Transfer Value (CETV) it is now well above the lifetime limit, however if I take a pension from the scheme at the end of April 2015 as planned, the calculation from my scheme is around 90% of the limit.

There are obviously some actuarial factors involved in how the scheme is valued depending on whether you stay in or move out.

Although I have not taken advice about this, it looks to me that I would probably incur a tax charge for going over the lifetime limit if I transferred out.

My plan is to draw down the maximum lump sum and take my full pension at the end of April but to continue working part-time, which my company allows, that way I ensure I get it tax-free as who knows what the next UK government plan to do.

Edited March 9, 2015 by The Fat Controller

[churchill]

I have already withdrawn 25% from my QROPS does this mean I can now also withdraw an additional 10,000 GPB pa ?

Thanks in advance

[The Fat Controller]

Churchill, I think the answer is, ask your provider !

Before anyone pulls me up about "tax-free" in my last post, I meant the lump sum and not the pension income

[GuestHouse]

I have already withdrawn 25% from my QROPS does this mean I can now also withdraw an additional 10,000 GPB pa ?

Thanks in advance

The £10,000 per annum relates to your tax allowance in the UK.

Since your QROPS is off-shore it will not be included in that £10K.

If you try to withdraw from an offshore QROPS and repatriate the income into the UK you could be faced with very high tax on that income.

[AyG]

I have already withdrawn 25% from my QROPS does this mean I can now also withdraw an additional 10,000 GPB pa ?

Thanks in advance

It depends upon the jurisdiction of your QROPS. The vast majority is still bound by the GAD rules. The only one I'm aware of that has changed the rules is Malta, and that has heft tax charges on the income.

There's some discussion of this subject at http://www.thaivisa.com/forum/topic/744966-does-the-liberalisation-of-uk-pensions-apply-to-qrops/

[churchill]

Churchill, I think the answer is, ask your provider !

Before anyone pulls me up about "tax-free" in my last post, I meant the lump sum and not the pension income

Thanks will do that and provide feedback ..

For those worried about annual fees ..

I am thinking of switching my QROPS to Momentum that for me reduces my annual costs to 500 GBP with free transfer , set up and no fees for the 1st year see

http://www.momentumpensions.com/2015/03/02/momentum-offering-free-qrops-switcher-scheme/

[Chivas]

I posted about this on anotherthread a few days ago in as much as I have 2 eligible Pots I can take from Standard Life and Friends Life (formally Provident)

However they have not got a scooby about whats occuring let alone new appropriate forms etc what tax will be with held over and above the tax free element etc etc..........Both came back to me over the last couple of weeks with the announcement and am not joking "Come back to us after April 6th and we MAY be able to help you......." !!

Edited March 9, 2015 by Chivas

[The Fat Controller]

Chivas, I have seen similar comments regarding the new rules and pension companies !

No matter what the change of law says, pension providers are NOT REQUIRED to provide full access as an option, it is entirely their decision as to whether to offer it

[Chivas]

Chivas, I have seen similar comments regarding the new rules and pension companies !

No matter what the change of law says, pension providers are NOT REQUIRED to provide full access as an option, it is entirely their decision as to whether to offer it

Well I'm inclined to agree thats theres going to be a lot of wailing and gnashing of teeth.........Now the Friends Life plan of mine was a Transfer Value only Plan but actually (by coincidence) and good fortune the planned retirement date of it was 55 in the first place, so Friends are unable to put any "financial penalties" into play on the basis I'm taking it before my elected Retirement date.......

However they are being difficult to say the least in the interim.....!!

[Chivas]

........and of course what will not have been forgotten by the Life Companies is the Billions under investment that will be withdrawn and the yearly management fees lost !!

I certainly will be Shorting the FTSE heavily in the run up to April 6th........There cannot possibly not be a dropping of the FTSE index

Edited March 9, 2015 by Chivas

[GuestHouse]

........and of course what will not have been forgotten by the Life Companies is the Billions under investment that will be withdrawn and the yearly management fees lost !!

I certainly will be Shorting the FTSE heavily in the run up to April 6th........There cannot possibly not be a dropping of the FTSE index

I think you are a tad late.

When the changes to the pension laws were announced, it wiped £4billion off the value of insurers in the UK.

[Chivas]

........and of course what will not have been forgotten by the Life Companies is the Billions under investment that will be withdrawn and the yearly management fees lost !!

I certainly will be Shorting the FTSE heavily in the run up to April 6th........There cannot possibly not be a dropping of the FTSE index

I think you are a tad late.

When the changes to the pension laws were announced, it wiped £4billion off the value of insurers in the UK.

Hardly.....!!

The Individual Share Price of Insurers may well have dropped but thats not what I'm talking about......

I'm talking about the anticipated drop in the FTSE index when Insurers are obliged to sell heavily Units on behalf of Clients many of which will hold Funds in Top Uk Stocks......

Edited March 9, 2015 by Chivas

[Chivas]

Why the hell cant we quote the OP of threads after all these years.......Absoutely ludicrous

@Guesthouse

Didnt notice something you mentioned in 5th paragraph of OP

I dont think you're right re segments of the 25% in the way you describe it..........??

The way its reads to me and after talking to the Life Companies and in addition to being an ex IFA and AR of Equity and Law (Axa now) is that yes the first 25% is tax free of that withdrawal but the rest will be taxed as normal........

Example one of my Pots is 100.000k plus. I decide at outset to just take £20,000........5k will be tax free and 15k will be taxed

Now that can be repeated indefinately until the Pot runs out..........

Its not the same as you described it......??

Eg if my pot was 100k and decided to take the lot then sure 25k tax free and the rest taxed.

You cant at outset again using an example of a 100k Pot say right 25k is tax free so I'll take 10k now and 15k next year without paying tax........

It cant work like that........?? Its impossible for the Inland Revenue to work on that Basis

Now thats only my take on it along with limited information my 2 Companies have provided so not set in stone !!

Cheers

[The Fat Controller]

I seems to be covered here

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/385065/TIIN_8130_2140.pdf

and depends on several factors, best of luck trying to work out what you have, what you can convert it to and how much is taxable

[Chivas]

I seems to be covered here

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/385065/TIIN_8130_2140.pdf

and depends on several factors, best of luck trying to work out what you have, what you can convert it to and how much is taxable

Exactly !! Absolute nightmare.....

[Chivas]

Let me update this one.......This is a "Live" Case via Standard Life.......

I am 55 later this month March ( not the date in TV Profile dont ask !! )

I have 2 Plans that fall under the New Legislation. One very small and another in 6 figures..........Standard Life hold the small one and it is a Stakeholder Personal Pension Plan, with selected retirement age of 55

Further to myself commentating that Standard Life were well behind it seems they have got themselves into Gear after just talking to their Pensions team.....

Their Website for registered users from 6th April will have an online application form to submit obviously online........Funds expected with client within 5 working days

Taxation........

Pot will be 25% tax free with rest charged at 20% and a Tax Form will be supplied for you to forward to the Revenue if you believe you will over pay tax within the Year 2015-2016

You dont have to wait till end of tax year to reclaim due tax I was informed. Submit tax form upon receipt of it.......

I'm happy with that, they were very professional and clear on what would happen

Edited March 10, 2015 by Chivas

[Chivas]

Update on this.........

Neither Standard Life or Friends Life are going to "charge" for Ad Hoc withdrawals. Most Life Companies will be the same. Where they "may" charge is where the original selected retirement date was say 60 or 65 so in otherwards you are "withdrawing early" so to speak.

Fortunately both mine were selected at 55 not that My life Companies would have charged anyway as its turned out...

[pontious]

Chivas, I have seen similar comments regarding the new rules and pension companies !

No matter what the change of law says, pension providers are NOT REQUIRED to provide full access as an option, it is entirely their decision as to whether to offer it

I fail to see how providers can refuse when the law has been changed. They have to comply with the law.

[elliss]

Chivas, I have seen similar comments regarding the new rules and pension companies !

No matter what the change of law says, pension providers are NOT REQUIRED to provide full access as an option, it is entirely their decision as to whether to offer it

Where do you get this information from ? .

Edited March 20, 2015 by elliss

[Chivas]

Chivas, I have seen similar comments regarding the new rules and pension companies !

No matter what the change of law says, pension providers are NOT REQUIRED to provide full access as an option, it is entirely their decision as to whether to offer it

I fail to see how providers can refuse when the law has been changed. They have to comply with the law.

They are complying.........They could well have been quicker out of the blocks but they are complying

[The Fat Controller]

Look at point 2 in the following article, this is what I meant about pension providers not having to offer drawdown.

http://money.aol.co.uk/2015/04/03/4-reasons-pension-freedom-is-a-bad-idea/

[Ricardo]

Why the hell cant we quote the OP of threads after all these years.......Absoutely ludicrous

Try using 'Copy' and then 'Paste' to get round this ?

[Chivas]

Live Update....

First day of New Rules and Standard Life had Online Applications already up and running........

Took me 5 minutes to complete online forms from registered user site, ticking off boxes and nothing more wanted than Bank Account Details and Full Name...........although National Insurance number was on "list" of requirements, it also stated it wasn't needed in all cases......It wasn't in mine

Very small Pot and took in Full........They are taking obviously tax on the amount not covered by the tax free allowance and are taxing at basic rate

I know reading other Posts here and on other threads it was anticipated that maybe higher rate tax would be paid (and then reclaimed) but not so with Standard Life or at least with my application.

Of course first day of new tax year so full allowance was available anyway

It was really very simple to do and whilst I took the lot the application was clear in that you could enter xyz amounts etc

Payment to completion within 10 days according to Final Page after completing Online Forms

Impressed with smoothness of application....

[The Fat Controller]

More grief for some, the link to the BT site in the middle has some good info

http://money.aol.co.uk/2015/04/08/accessing-pension-cash-easier-said-than-done/

[Chivas]

More grief for some, the link to the BT site in the middle has some good info

http://money.aol.co.uk/2015/04/08/accessing-pension-cash-easier-said-than-done/

Absolutely zero problems with Friends Life and Standard Life

Simple reason for delaying is the ongoing fees being generated by still being invested.....No other reason at all

Edited April 9, 2015 by Chivas

[Chivas]

An update to anyone its relevant.......

Unless your pot comes under Small Rules (which is under £10,000) you will pay Emergency Tax at 40% on the portion of your Pot subject to Tax and will need to claim back the overpayment from the IR if that applies to you.

That has been somewhat unclear to date however I know three "live" cases and the rules are the same from different life companies

Example a £100,000 Pot

25 % tax free so £25,000

The £75,000 Balance goes at 40% so the life company will hold in this instance £30,000 (ouch) and Tax Cert supplied for the Revenue

So up front you receive just £55,000 of that £100,000 Pot.....

Edited you need to be sure what you're doing because in above example whilst some of the pot would be taxed at basic rate plus the personal allowance is ignored a lot will be still be subject to higher rate tax

Edited April 18, 2015 by Chivas

[Ricardo]

An update to anyone its relevant.......

Unless your pot comes under Small Rules (which is under £10,000) you will pay Emergency Tax at 40% on the portion of your Pot subject to Tax and will need to claim back the overpayment from the IR if that applies to you.

That has been somewhat unclear to date however I know three "live" cases and the rules are the same from different life companies

Example a £100,000 Pot

25 % tax free so £25,000

The £75,000 Balance goes at 40% so the life company will hold in this instance £30,000 (ouch) and Tax Cert supplied for the Revenue

So up front you receive just £55,000 of that £100,000 Pot.....

Edited you need to be sure what you're doing because in above example whilst some of the pot would be taxed at basic rate plus the personal allowance is ignored a lot will be still be subject to higher rate tax

Not to disagree with the thrust of your post, but just to point out that if the life-company retains GBP30k to pass to HMRC, you will of course receive GBP70k direct initially (not GBP55k).

Definitely "ouch" !

Edited April 19, 2015 by Ricardo

[Chivas]

An update to anyone its relevant.......

Unless your pot comes under Small Rules (which is under £10,000) you will pay Emergency Tax at 40% on the portion of your Pot subject to Tax and will need to claim back the overpayment from the IR if that applies to you.

That has been somewhat unclear to date however I know three "live" cases and the rules are the same from different life companies

Example a £100,000 Pot

25 % tax free so £25,000

The £75,000 Balance goes at 40% so the life company will hold in this instance £30,000 (ouch) and Tax Cert supplied for the Revenue

So up front you receive just £55,000 of that £100,000 Pot.....

Edited you need to be sure what you're doing because in above example whilst some of the pot would be taxed at basic rate plus the personal allowance is ignored a lot will be still be subject to higher rate tax

Not to disagree with the thrust of your post, but just to point out that if the life-company retains GBP30k to pass to HMRC, you will of course receive GBP70k direct initially (not GBP55k).

Definitely "ouch" !

Apologies indeed.......Yes of course 70k remitted to yourself 30k initially to IR

I wont edit (even if I can) my original post

[ignis]

No idea if this is the correct Forums to ask ??

I need help and advise... I simply have no idea about Private Pensions,

I do have a United Friendly Private Pension Plan No xxxxxxx [have the number] likewise have the number Personal Pension No: xxxxxx

I have the date and day started and 19 years later the date and day ended as no longer working, but have No other info or documents at all, lost somewhere, as moved about to different Countries before coming here 11 years ago... here always lived at the same address..

​over the past 9 year have sent a number of emails + 3 or 4 letters registered [so I know they received them via on-line tracing] yet never received a reply... every time downloaded the 'change of address Form' and sent... last letter sent a month ago by EMS @ 1.300 baht !! on-line tracing showed it was signed for a few day later. yet nothing no reply at all, not even a email..

I do not use a phone, do not even have one in the house, hearing is not what it used to be, so pointless trying to phone..

Have no idea what to do ? no idea if and what is in the 'pot' will there be some sort payment due? 65 this year so anything more than my State Pension would be nice.