WITHDRAWING MONEY PURCHASE FUNDS

Transcription

1 WITHDRAWING MONEY PURCHASE FUNDS

2 WITHDRAWING MONEY PURCHASE FUNDS Pension commencement lump sum plus annuity Uncrystallised funds pension lump sum Flexi -access drawdown Small pots PRESERVE YOUR FUTURE OPPORTUNITIES BY GETTING ADVICE 2

3 MONEY PURCHASE WITHDRAWALS POST 5 TH APRIL 2015 PENSION POT PCLS Normally 25% Uncrystallised funds pension lump sum* Lifetime Annuity Flexi-access drawdown 3 * Not available to clients with Primary or Enhanced protection and protected cash entitlement over 375,000 Not available to clients who have a Lifetime Allowance enhancement factor and a lump sum allowance of less than 25%

4 PENSION COMMENCEMENT LUMP SUM PLUS ANNUITY* PCLS normally 25% within available Lifetime Allowance. Protected PCLS allowed Balance used for Lifetime annuity. Open market option Increasing flexibility in Lifetime annuity design An element of mortality cross subsidy New style annuity reduces annual allowance to 10,000 with no carry forward A SECURE TRADITIONAL ROUTE FOR MATURING FUNDS 4 * The total value of the two crystallising events count against the member s remaining lifetime allowance.

5 UNCRYSTALLISED FUNDS PENSION LUMP SUM* Total access to money purchase funds encourages bigger contributions into registered schemes 25% paid tax free plus 75% taxed at members marginal rate Annual allowance reduced to 10,000 and carry forward lost Phasing is possible if contract terms allow If all of the tax free cash is taken, all of the balance is charged at the member s marginal rate. There are no crystallised funds THE ONLY WAY OUT FOR SOME LEGACY BOOK PLANS? 5 * The value paid will count against the members remaining lifetime allowance

6 FLEXI ACCESS DRAWDOWN* Total access to money purchase funds encourages bigger contributions into registered schemes Access to some or all of a members pension commencement lump sum without income Funds remain within the pension until required Planning opportunities to minimise income tax on withdrawals The same tax rules apply to remaining funds on death benefits THE PERFECT HOLDING TANK FOR RETIREMENT CAPITAL 6 * The total value of the two crystallising events count against the member s remaining lifetime allowance.

7 THINGS TO AVOID WHEN MAKING WITHDRAWALS Paying your lifetime s income tax bill in advance in a single tax year Substantially reducing your retirement capital and limiting your future income Limiting your opportunities to make further contributions and claim additional tax breaks Losing protected tax free cash when making a withdrawal Paying more Lifetime Allowance than necessary Paying emergency rate tax initially when not required to do so TAKE ADVICE AND AVOID COMPLICATIONS 7

8 CASE STUDY FLEXI-ACCESS DRAWDOWN Paul is a director of his own company. He employs his wife Julie part time He has an EPP worth 700,000. It has protected tax free cash of 200,000. There is no Flexi- access drawdown facility Julie has an EPP in the same scheme worth 80,000. They want his tax free cash to allow Julie to buy a second PAUL AGE 60 JULIE AGE 54 property to create income and use her personal allowance They want to fully retire when Paul is 65, and sell the company Paul doesn t need pension income just now 8

9 CASE STUDY FLEXI-ACCESS DRAWDOWN Block transfer Paul and Julie into individual CRA s Access Paul s 200,000 tax free cash Park his balancing funds in flexi-access drawdown Continue funding using Pauls full annual allowance and carry forward* PAUL AGE 60 JULIE AGE 54 9 * Re-cycling rules may apply in certain circumstaances

10 PAULS EXISTING ARRANGEMENT USING UFPLS? Tax free cash limited to 175,000. Taxable income in 2015/16 increased by 525,000. Future funding restricted to 10,000. PENSION FUND 700,000 PCLS Normally 25% Uncrystallised funds pension lump sum* Lifetime Annuity Flexi-access drawdown 10 * Not available to clients with Primary or Enhanced protection and protected cash entitlement over 375,000 Not available to clients who have a Lifetime Allowance enhancement factor and a lump sum allowance of less than 25%

11 PAULS CRA USES FLEXI-ACCESS DRAWDOWN PENSION FUND 700,000 PCLS 200,000 25,000 additional tax free cash No taxable income created in 2015/16. Future funding unrestricted*. Uncrystallised funds pension lump sum* Lifetime Annuity Flexi-access drawdown account 500, *Re-cycling rules may apply in certain circumstances. Annual allowance reduces to 10,000 after income is taken

12 CASE STUDY FLEXI-ACCESS DRAWDOWN SUMMARY OF BENEFITS Creates additional tax free cash of 25,000 Income of 525,000 no longer added to Peter s income tax bill to be taxed at his marginal rate in 2015/16 Future funding allowed on full 40,000 annual allowance plus any carry forward* PAUL AGE 60 JULIE AGE 54 Retirement capital transferred from Paul to Julie to use her personal allowance No change to tax payable on Pauls death Multiple plans on our platform keeps charges down 12 * Re-cycling rules may apply in certain circumstances

13 Calls may be monitored and recorded for training purposes and to avoid misunderstandings. Old Mutual Wealth is the trading name of Old Mutual Wealth Limited which provides an Individual Savings Account (ISA) and Collective Investment Account (CIA) and Old Mutual Wealth Life & Pensions Limited which provides a Collective Retirement Account (CRA) and Collective Investment Bond (CIB). The WealthSelect Managed Portfolio Service is provided by Old Mutual Wealth Limited and Old Mutual Wealth Life & Pensions Limited. (Optional include for WealthSelect material only) Old Mutual Wealth Life Assurance Limited, Old Mutual Wealth Limited and Old Mutual Wealth Life & Pensions Limited are registered in England & Wales under numbers , and respectively. Registered Office at Old Mutual House, Portland Terrace, Southampton SO14 7EJ, United Kingdom. Old Mutual Wealth Life Assurance Limited and Old Mutual Wealth Life & Pensions Limited are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Their Financial Services register numbers are and respectively. Old Mutual Wealth Limited is authorised and regulated by the Financial Conduct Authority with register number VAT number for all above companies is Old Mutual Global Investors is a trading name for Old Mutual Global Investors (UK) Limited and Old Mutual Investment Management Limited both of which are authorised and regulated by the Financial Conduct Authority. Their Financial Services register numbers are and respectively. Old Mutual Global Investors is registered in England & Wales under number and its registered office is 2 Lambeth Hill London EC4P 4WR.Old Mutual Investment Management is registered in England & Wales under number and its registered office at Millennium Bridge House, 2 Lambeth Hill, London, EC4V 4AJ. VAT number for all above companies is

14 LEGAL FOOTER This communication is designed for and directed at professional financial advisers. It should not be relied on by consumers. This presentation is designed to assist financial advisers in taking the appropriate examination. Old Mutual Wealth cannot be held responsible for any errors or omissions in the details. This presentation is based on Old Mutual Wealth s interpretation of the law as at September We believe this interpretation is correct, but cannot guarantee it. Tax relief and the treatment of investment funds and trusts may change. The value of any tax relief will depend on the investor s individual circumstances. Investors should be aware that the value of units can fall as well as rise. The value of investments may fluctuate as a result of market and currency fluctuations and are not guaranteed. Old Mutual Wealth does not accept any responsibility for any losses or liabilities arising from actions taken or omissions as a result of the information contained in this presentation. Further details of the Old Mutual Wealth products can be obtained from the appropriate Technical Guides which are available from any Old Mutual Wealth Group office. 14