Pension and drawdown

**Fred Bloggs** · 13 February 2021, 16:56

Originally posted by smudger View Post

I'm over 55 and still contracting. I've been looking into the rules regarding drawdown pensions. Am I right in thinking that for every £1000 I directly put into my pension, I can put it straight into drawdown and take £250 tax free as long as I leave the £750 there. So effectively it's a way of increasing my income tax free whilst adding to my pension?

Yes.

**Paralytic** · 13 February 2021, 17:39

But watch out if you go into MPAA and also the recycling rules if you intend to put (any of) that 25% back into your pension with the aim of getting tax relief and a further 25% tax free withdrawal.

Drawdown FAQs | Hargreaves Lansdown.

PTM133810 - Pensions Tax Manual - HMRC internal manual - GOV.UK

**Fred Bloggs** · 13 February 2021, 18:04

Originally posted by Paralytic View Post

But watch out if you go into MPAA and also the recycling rules if you intend to put (any of) that 25% back into your pension with the aim of getting tax relief and a further 25% tax free withdrawal.

Drawdown FAQs | Hargreaves Lansdown.

PTM133810 - Pensions Tax Manual - HMRC internal manual - GOV.UK

Just taking the 25% will not trigger MPAA, but correct to flag it up. It isn't widely understood that if you take even 1p more than the tax free lump sum, then MPAA is triggered.

**Lance** · 13 February 2021, 19:58

Originally posted by Fred Bloggs View Post

Just taking the 25% will not trigger MPAA, but correct to flag it up. It isn't widely understood that if you take even 1p more than the tax free lump sum, then MPAA is triggered.

When the pension fund is in various funds, shares, bonds etc. calculating the 25% drawdown is not gonna be simple though I guess.....
How do you factor unrealised gains into that for example? What is the exact figure you use and when is the date?

**Fred Bloggs** · 13 February 2021, 20:07

Originally posted by Lance View Post

When the pension fund is in various funds, shares, bonds etc. calculating the 25% drawdown is not gonna be simple though I guess.....
How do you factor unrealised gains into that for example? What is the exact figure you use and when is the date?

Different platforms show it differently. For example, HL show crystallised and non-crystallised funds as two discrete pots so it's very easy to see what's what. Other platforms take a slightly less obvious approach. For example, at Interactive Investor you have to click through a couple of links to see how much is crystallised and how much is non-crystallised but not as two discrete pots of assets. It's a bit messier at II and not quite as easy to find until you know where to look. But at anytime, you can see how much remains uncrystalised on the day. For other platforms, I don't have personal experience. HTH.

**psychocandy** · 28 September 2021, 08:20

Really? So you can pay pension in and just take it out like that (as long as you don't take more than 25% of the total over the year)?
Incentive to bung loads into pension then....

Im with HL (and a year or so from 55) so was wondering how it works?

MPAA is where you're limited to contribs yeh? But only if you take more than 25% yeh?
What if you've got one active fund you're paying into but one dormant fund you;re taking out of?
Or does triggering MPAA affect ALL you're funds?

**Fred Bloggs** · 28 September 2021, 10:22

Originally posted by psychocandy View Post

Really? So you can pay pension in and just take it out like that (as long as you don't take more than 25% of the total over the year)?
Incentive to bung loads into pension then....

Im with HL (and a year or so from 55) so was wondering how it works?

MPAA is where you're limited to contribs yeh? But only if you take more than 25% yeh?
What if you've got one active fund you're paying into but one dormant fund you;re taking out of?
Or does triggering MPAA affect ALL you're funds?

Put in say a £10000*** the day before you are 55. Assuming the £10000 is the total amount in the SIPP account, you draw £2500 the next day when you are 55 tax free. The balance remains in drawdown but you can take zero income.

Take £2500.01 and you trigger the MPAA. You really wouldn't want to do that at 55 years old all things bring equal.

MPAA, once triggered, counts towards all pensions.

*** Assuming company contribution so no wait for tax reclaim.

Disclaimer - I am a regular punter, not an advisor, check what I said is true.

**Fred Bloggs** · 28 September 2021, 10:24

Originally posted by Fred Bloggs View Post

Different platforms show it differently. For example, HL show crystallised and non-crystallised funds as two discrete pots so it's very easy to see what's what. Other platforms take a slightly less obvious approach. For example, at Interactive Investor you have to click through a couple of links to see how much is crystallised and how much is non-crystallised but not as two discrete pots of assets. It's a bit messier at II and not quite as easy to find until you know where to look. But at anytime, you can see how much remains uncrystalised on the day. For other platforms, I don't have personal experience. HTH.

I see II have now made it easier to see drawdown and non-drawdown numbers, but there's still no separate "pots" of money.

Pension and drawdown