25% - to take or not to take...

[Simpo Two]

I have a private pension fund of about £155K. I'd always intended to leave it alone and only take it/some of it when I needed it (and pay tax on the 'income'). However I'm 55 later this year and so have the option of liberating 25% tax free. I don't want to spend it, merely reinvest it in an alternative vehicle/s. Assuming the funds within each grow at the same rate, being able to release it tax free now might be advantageous in the long run.

I know there are too many variables for a definitive answer but what does the panel think in general? I stress this is for reinvestment not spending.

[Simpo Two]

condor said:

What have been the returns on your pension fund to date? and if 6% or more would you be able to get a higher percentage with a low level of risk such as you're currently getting?

I don't see it as a fund performance issue, more of a vehicle issue. A pension is only funds in a wrapper; I might be able to invest the money in the same funds (7IM) directly and have the same underlying performance but without the strings.

Ozzie Osmond said:

£155k isn't a lot of dosh at age 55. You need another 10 years tax-free growth on that. I can't see it makes much difference whether you leave it invested in pension or get it out and invest it in ISA - the investment choices are identical. However, there's often more cost and hassle doing two things than doing one thing.

I suppose that's the difference, the cumulative effect of (largely) tax-free growth.

Re ISAs I have about the same amount in those - but I don't think I'll be paying income tax from now on so unless I'm mistaken the benefits of an ISA are nil.

[Simpo Two]

Thanks all.

Taking the long view, there's £155K (and it will grow) that I may never actually be able to get back. With any other investment, if I wish, I can sell it and roll about in it. By contrast I feel the money in my pension fund is in escrow. The current window to get money out is epehemeral; eventually the Government, be they Conservative or Labour, will shut the door and make pensions harder and harder to realise because they need the money for themselves.

My long term prediction (because we're talking 20+ years here) is that pensions will slowly become extinct, just as BTL is going extinct.

Thoughts?

[Simpo Two]

Apparently you can't:

https://www.pensionwise.gov.uk/take-cash-in-chunks

So I may as wll leave it there and let it fester. Whether I'll ever actually get it, who knows. Probably have to live to 120.

Love pensions.

[Simpo Two]

Ginge R said:

All things considered, I'd probably take it while I could.

http://www.independent.co.uk/news/world/europe/nat...

No no no, we have the wonderful EU which will send Putin a directive ordering him to stop it!



Hmm, Chamberlain v Hitler just popped into mind.

[Simpo Two]

DonkeyApple said:

One thought: Do you still earn income?

No, I'm living on investments/savings.

otherman said:

You can also choose to take all 25% tax free in one go, which is what most people do.

That would appear to be flexi-access drawdown:

https://www.pensionwise.gov.uk/adjustable-income
https://www.moneyadviceservice.org.uk/en/articles/...

But then the other 75% has to be re-invested elsewhere it seems.

The idea was to liberate as much as possible tax-free from my pension fund so I had more control over it, for example adding it to existing investments. As it stands I can take money to live on from several different sources; it would be nice to spread it across them.

[Simpo Two]

PurpleMoonlight said:

It would be crystallised funds from which any pension paid would be deemed flex-access pension, but until you actually draw some pension the lower annual allowance isn't triggered.

However, as you are not making any ongoing pension contributions it's arguably a bit of a red herring.

You should perhaps look to crystallise an then draw pension so that you use all your personal allowance each tax year.

The only other thing to consider is that you are taking funds from a currently tax free environment to a potentially taxable environment. Only you can really decide if that is right for you.

Thanks PM. I think on balance there are no clear advantages emerging so I shall leave it be. I can only hope the pensions environment doesn't become less favourable/flexible as the economy worsens and Labour come to power (we saw what Brown did).

As for personal allowance, that will of course be used up taking the money I live on.

Thanks all, it's been a helpful discussion.