5 Things You Need to Know About Pension Drawdown

[@ZhannaDavidova]

The best financial KZbin channel for everyday people. Your advice has been a game changer for me and my family. Thank you!

[@cherylhills3227]

No doubt being financially free and able to afford these luxuries cannot be overemphasized, making smart plans and setting up diversified investment portfolios is quite essential.

[@BendyChoy]

I'd be retiring or working less in 8 years, and considering this financial recession, Im deciding to begin taking up skilled trades. I'm curious to know best how people split their pay, how much of it goes into savings, spendings or investments, learn around $130K per year but nothing to show for it yet.

[@rodgertim2881]

You should contribute to your retirement diligently, or better still look into financial planning don't come to youtube for advise, consult a Local or trusted online broker/planner.

[@BarbaraPearson55]

On your own you could seek out several of these financial advisors, make sure the one you settle on is a fiduciary and not a fake. Know what you're getting out of it and see if your targets can be met.

[@BendyChoy]

How do I find a good finance advisor? How do you know if they are trustworthy and competent.

[@jonathanholmes7922]

Spot on simple explanation. No BS 👍

[@user-fv1576]

Thanks for the video . Who here thinks the state has made the drawdown process complex so the general public pay more tax than they need to, or generate jobs for advisors ?? 🤐

[@stevegeek]

Good advice about taking advantage of the tax relief by still paying up to £2880 into pension when retired…I’ve just done this. But I think you need to be careful not to fall foul of the recycling rules to avoid penalty from HMRC.

[@AlexNorman-Jones]

good point.

[@MH-jp8xm]

Can you explain what happens with the tax if you do a monthly draw down like a salary

[@marktaylor9500]

Great video, thanks. Helping to make pensions a little clearer. I'm thinking of taking 25% out of my pension when I turn 55 in September. Using simple terms can I simply take 25% tax free and then just continue to pay into my (work) pension pot as normal until retirement age? Thanks again

[@farab4391]

My biggest problem with drawdown is that you can't do it will all pensions, it can only be done with a pension that supports it. Why it's like this I'm not sure. So my worry is that, I'm very happy with my current pension and the rate at which it grows, but it doesn't support drawdown. So I would have transfer my pension elsewhere to be able to use drawdown. That seems like such a risk to me, moving to a financial provider I'm not familiar with and to a pension fund I'm not familiar with. I get the feeling that the providers supporting drawdown aren't giving you the best deal, because they know your investment is likely to decrease over time, with no more contributions coming in and you withdrawing funds. Are there plans to eventually have drawdown available on all pensions? I don't see why not.

[@laro1002]

Great explanation - a complicated subject made clearer 👍

[@AlexNorman-Jones]

Glad it was helpful!

[@dan3885]

Really well presented and informative vid ta dude 😎

[@AlexNorman-Jones]

Appreciate it!

[@johnnyworzel3741]

Very clear, thanks.

[@AlexNorman-Jones]

Thanks!

[@inuvik491]

What happens to crystallised funds which grown due to future investment ,do you get 25% of that tax free ?

[@Desmond.TuTu.]

I wonder if Labour will tinker with PCLS 😩….. they haven’t said they won’t and they’ve got to get the readies from somewhere to pay for manifesto promises.

[@AlexNorman-Jones]

hmm i doubt it, more likely LTA which siunds like flip flopping. could also see higher rate tax relief and death benefits/iht position of pensions going before changes to PCLS, but what do i know!!

[@Dunk1970]

​@@AlexNorman-JonesI agree. I am assuming the surviving pot will be included inside the IHT calculation. The higher rate tax part will also likely go, as you say. I also expect them to accelerate the age at which you can take your pension, to stop us retiring in our 50s. I presume they can't just jump it up too quickly though, with many prepping retirement right now.

[@DillTheDog]

Ok so have watched twice but still not sure about something, so on the basis that it a 100k and Private pension and that I’m over 55, and I want to withdraw the full amount, are you saying that to reduce the total amount of tax that I would should first only take 25%, then do it again after the first one completed, then repeat take another 25%. Etc and if that is correct is there a time line ie once every financial year ?

[@AlexNorman-Jones]

No if you took the whole £100k pension all at once, this is an UFPLS. 25% is tax free and the remaining 75% is taxable at your marginal rate and added to your other income and taxed accordingly. In other words taking it all as a lump sum would lead to a large tax bill. Even if we assume you have no other income, £25k would be taxed at 40% (£75k - £50,270). This video looks at how a pension is taxed in more detail -kzbin.info/www/bejne/mnSqmmaLe6-ggbs Hope that helps

[@DillTheDog]

@@AlexNorman-Jones thank you will view it now 😎

[@Mr.DDreamer]

Veey well explained 👍

[@AlexNorman-Jones]

thanks for that!

[@chqshaitan1]

Hi bud, good video, just wanted to point out that there is a typo in the title, it should be drawdown, not dawdown :)

[@AlexNorman-Jones]

top man! the hours it takes to make rhw video and i cant get the title right 😂

[@DKNW62]

Is there a scenario where ufpls taken regularly could be financially better than drawdown as any growth in crystallised funds are taxable right now

[@stevegeek]

I didn’t know that any growth in crystallised funds was taxable. Are you sure about that? Personally I’m taking monthly UFPLS withdrawals of around £1300, to use up my personal allowance with tax free cash but no tax liability. I want to preserve my tax free portion as long as possible and leave as much as I can uncrystallised to keep growing.

[@AlexNorman-Jones]

@@stevegeek the growth in the crystallised funds isn't taxable. The income/capital taken from crystallised funds will obviously be taxable as and when it is taken.

[@stevegeek]

@@AlexNorman-Jones Thanks for clarification 👍

[@IansMusical]

Interesting video thanks, but I think I'm missing something. I understood the first example of taking £25k leaving £75k but the second example of taking £10k I'm completely lost with. Surely there's £90k left!?

[@AlexNorman-Jones]

Yes, but 10k tax free cash crystallised 40k, - with 30k moving to crystallised funds. 60k is still within the pension but uncrystallised (so he can take 25% tfc of this amount). So in summary yes £90k still in pension - 30k crystallised funds and 60k in uncrystallised funds. Hope that helps!

[@PeteMulv]

@@AlexNorman-Jones Thanks for clearing that up. I now understand, that covers the issue of the remaining funds going up in value and the total 25% TFC also going up. So 25% rule is always on the uncrystallised fund. Cracking video, well explained.

[@rogerathome6980]

⁠I’m still confused, where do the £40k and £60k figures come from. Are these 40/60% figures always used regardless whether you take £10/20/25k of your tax free amount

[@rogerathome6980]

So effectively why this ratio of 40/60?

[@AlexNorman-Jones]

@@rogerathome6980 No so you crystalise 4 x the amount of tax free cash you take, eg if you take £100k tfc, this crystallises 400k, with £100k paid as tax free cash and the £300k moves over to the crystallised side of the pension. Say you only took 5k tax free cash, this crystallises £20k of pension. 5k paid as tax free cash and the remaining £15k moves to the crystallised side of the pension. Hope that helps

[@russellhodges1009]

With an average life expectation of 81 in the UK and a healthy life expectation of 63, why would you plan beyond 85? The example of taking the unsustainable amount from your pension pot is probably the best option. The three M's, Money, Mobility and Marbles is a key factor with money being probably the least restriction in old age? Walking and interaction with others, board games etc that are very low cost options after an enjoyable life lived when you could afford it, now you have only Mobility and your Marbles. Around 1 in 6 people (from 65)will have a stroke in the UK, with a rising probability as you get older, you will probably kiss goodbye to your Mobility if you have a stroke. 1 in 11 (from 65) will show signs of dementia, increasing probability as each year passes, start to goodbye to your Marbles. Never be in a position to regret something you didn't do. ❤

[@OneAndOnlyMe]

I'm not leaving any of my pension as inheritance, I'm using it up LOL! I've never agreed with it being tax free anyway as I don't see why they should inherit so much and not pay tax on it. I'm not even sure why we're allowed 25% tax free given we've never paid tax on it. This seems like a flaw in our tax policies, and one that needs to be rectified.

[@AlexNorman-Jones]

Can see the point of view on the IHT side of pensions but respectively disagree on your point on TFC. The TFC is one of the biggst incentives of saving into pension. If this was removed i'd imagine savings rate would drop which would exacerbate the retirement crisis many retirees will face.

[@OneAndOnlyMe]

@@AlexNorman-Jones I don't believe people save into a pension because they can later take 25% tax free as most people's pension pots are not that big. Most save for some kind of pension.

[@AlexNorman-Jones]

@@OneAndOnlyMe not the main reason, but I would argue this, along with the tax relief, is one of the biggest incentive to save which is overwhelming a good thing in my book.

[@stevenrix7024]

@@AlexNorman-JonesImmediate tax relief at the time of paying into the pension pot (40% or more, if you are lucky enough to earn more than £50k p.a.) plus flexibility as to how you withdraw. You could withdraw a £125k pension pot at £12.5k per year for ten years (assuming no growth of undrawn funds, no state pension and ignoring tax free allowances) and pay zero income tax as you are below the personal allowance each year. So yes, it’s a tax perk designed to encourage saving - for now, anyway…

[@markantony530]

Everyone repeat after me... MPAA - Money Purchase Annual Allowance. Class dismissed :-)

[@clivewilliams5668]

How does someone just take their personal allowance and no tax free cash out of their dc pot in a year

[@AlexNorman-Jones]

Hi Clive - can't do that I am afraid. To take crystallised funds you have to have crystallised your pot.