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UK Pension and income drawdown

UK Pension and income drawdown

Old Apr 16th 2014, 3:39 pm
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Default UK Pension and income drawdown

I live in the USA and have some FSAVC's in the UK (around 60K with Prudential). For a variety of reasons, I am less than wildly enthusiastic about using those funds to purchase an annuity and have been trying to look at income drawdown instead.

Sadly, the UK nanny state does not permit the Pru to discuss this with me. They are required to speak only with a financial advisor. I tried calling a couple but they did not have the licenses to advise a non-resident. So I called one of the big firms (Towry) who wanted 300 quid an hour to talk to me. No thanks!

So now I'm pretty much resigned to the annuity although I'll likely just wait a few years in case the regulations/options become easier. However, I'd thought I'd ask if anyone else here had been around this particular mulberry bush and learned anything that might be helpful.
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Old Apr 16th 2014, 4:11 pm
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Default Re: UK Pension and income drawdown

I would be very dubious about what the Pru tells you and fully understand the terms of your pension yourself rather than relying on what you are told. You might look into moving the funds to another provider, if possible. The new UK pension rules will let you do pretty much anything you want with the money so maybe wait for those to come into effect.

Last edited by nun; Apr 16th 2014 at 4:46 pm.
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Old Apr 16th 2014, 4:55 pm
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Default Re: UK Pension and income drawdown

Originally Posted by malch
I live in the USA and have some FSAVC's in the UK (around 60K with Prudential). For a variety of reasons, I am less than wildly enthusiastic about using those funds to purchase an annuity and have been trying to look at income drawdown instead.

Sadly, the UK nanny state does not permit the Pru to discuss this with me. They are required to speak only with a financial advisor. I tried calling a couple but they did not have the licenses to advise a non-resident. So I called one of the big firms (Towry) who wanted 300 quid an hour to talk to me. No thanks!

So now I'm pretty much resigned to the annuity although I'll likely just wait a few years in case the regulations/options become easier. However, I'd thought I'd ask if anyone else here had been around this particular mulberry bush and learned anything that might be helpful.
I went round that "mulberry bush" as well, 2 yrs. ago - to no avail.

I had the sense that if only I knew someone in UK who could waste time on my behalf searching for a UK Financial Advisor willing to act on my behalf - I'd be able to do Income Drawdown (for which I did qualify).
But I didn't - so I couldn't.
FYI: The in-house licensed FA at insurance co. which held my Pensions (extremely helpful, brilliant really) advised me there's no UK restriction preventing an independent FA from acting on behalf of someone no longer resident in UK. (which was the stumbling block)

I'd suggest, since Income Drawdown isn't something you'd be doing for a few years - next time you're in UK - contact a few FAs (ones not telling you it'll cost £300 to talk to you Talking to you should be free) and discuss how this might be set up.

Last edited by MMcD; Apr 16th 2014 at 4:58 pm. Reason: deleted 1 quote (it printed twice)
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Old Apr 16th 2014, 4:58 pm
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Default Re: UK Pension and income drawdown

As suggested, I think it will become a lot simpler when the new pension rules come into effect. Then your Pru investments will become not much different from savings (albeit different from the tax perspective).
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Old Apr 16th 2014, 5:06 pm
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Default Re: UK Pension and income drawdown

The more I learn about the existing rules surrounding UK pensions the more annoyed I become.
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Old Apr 16th 2014, 5:07 pm
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Default Re: UK Pension and income drawdown

Originally Posted by MMcD
I went round that "mulberry bush" as well, 2 yrs. ago - to no avail.

I'd suggest, since Income Drawdown isn't something you'd be doing for a few years - next time you're in UK - contact a few FAs (ones not telling you it'll cost £300 to talk to you Talking to you should be free) and discuss how this might be set up.
Thanks. I just spoke to one FA firm in the UK. They couldn't/wouldn't take my business as a non-resident but the very nice gent was extremely helpful and spent about 20 mins on the phone with me.

His recommendation pretty much echoed my own conclusions -- just wait 2-3 years. The regulations are trending toward the more liberal/flexible, and the available products/options are increasing.

Works for me: I don't need any of that cash now and the funds can remain fully invested while the available options improve.
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Old Apr 16th 2014, 5:12 pm
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Default Re: UK Pension and income drawdown

Originally Posted by nun
The more I learn about the existing rules surrounding UK pensions the more annoyed I become.
I hear you. All of this nanny state nonsense restricting what you can or cannot do with your own money. But no protection against the major frauds/ripoffs (speaking as a victim of the late Robert Maxwell pension theft)!
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Old Apr 16th 2014, 5:17 pm
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Default Re: UK Pension and income drawdown

Originally Posted by malch
I hear you. All of this nanny state nonsense restricting what you can or cannot do with your own money. But no protection against the major frauds/ripoffs (speaking as a victim of the late Robert Maxwell pension theft)!
I don't see it as "Nanny State" more as the financial firms getting the politicians to make the rules for them rather than the investor. There is something to be said for having an annuity as part of your retirement income as long as it has reasonable terms and I don't think current UK pensions could be described as good value for money.
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Old Apr 16th 2014, 5:26 pm
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Default Re: UK Pension and income drawdown

Originally Posted by nun
I don't see it as "Nanny State" more as the financial firms getting the politicians to make the rules for them rather than the investor. There is something to be said for having an annuity as part of your retirement income as long as it has reasonable terms and I don't think current UK pensions could be described as good value for money.
I certainly agree that big businesses have way too much influence on the legislators (UK and USA).

And yes, annuities are a very useful instrument. But not for all people in all situations. I don't need that particular pot to produce a guaranteed fixed income and I do want flexibility.

Also, annuity rates tend to track Gilts and following a few years of extremely low interest rates, they're not exactly attractive right now.
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Old Apr 16th 2014, 5:50 pm
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Default Re: UK Pension and income drawdown

Originally Posted by malch
I certainly agree that big businesses have way too much influence on the legislators (UK and USA).

And yes, annuities are a very useful instrument. But not for all people in all situations. I don't need that particular pot to produce a guaranteed fixed income and I do want flexibility.

Also, annuity rates tend to track Gilts and following a few years of extremely low interest rates, they're not exactly attractive right now.
I agree. I'd wait to see how the new UK rules turn out. I certainly would'nt buy a UK annuity right now if I could avoid it
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Old Apr 16th 2014, 10:07 pm
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Default Re: UK Pension and income drawdown

DO NOT BUY AN ANNUITY. Wait until the legislation comes into force next year for Osborne's freeing up of pensions. In the meantime, if you are itching to get moving, then open up an expat SIPP, and transfer the funds into that.
There are plenty of UK providers who will open a SIPP for expats.
Then you can immediately start income drawdown.
But dont forget, and I am a qualified accountant and have sought USA advice on this...Any tax free element of pensions in that UK will still be taxable in the USA.
If anyone has a differing opinion on this I would love to hear from them.
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Old Apr 16th 2014, 10:10 pm
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Default Re: UK Pension and income drawdown

Originally Posted by MidwestBob
DO NOT BUY AN ANNUITY. Wait until the legislation comes into force next year for Osborne's freeing up of pensions. In the meantime, if you are itching to get moving, then open up an expat SIPP, and transfer the funds into that.
There are plenty of UK providers who will open a SIPP for expats.
Then you can immediately start income drawdown.
But dont forget, and I am a qualified accountant and have sought USA advice on this...Any tax free element of pensions in that UK will still be taxable in the USA.
If anyone has a differing opinion on this I would love to hear from them.
Nope, sounds like good advice....the US taxation of the UK 25% tax free lump sum is well established.
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Old Apr 16th 2014, 10:18 pm
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Default Re: UK Pension and income drawdown

Originally Posted by nun
Nope, sounds like good advice....the US taxation of the UK 25% tax free lump sum is well established.
Agreed. However, in the case of my FSAVC's I think I can establish a cost basis and avoid tax on at least some withdrawals (maybe not the 25% lump sum). I've only glanced at the rules so far -- I ordered the applicable booklets from IRS for study.
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Old Apr 16th 2014, 10:33 pm
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Default Re: UK Pension and income drawdown

Originally Posted by malch
Agreed. However, in the case of my FSAVC's I think I can establish a cost basis and avoid tax on at least some withdrawals (maybe not the 25% lump sum). I've only glanced at the rules so far -- I ordered the applicable booklets from IRS for study.
If you paid US tax on the contributions as they were made you will have a US basis and if you are a US resident when you make the withdrawals you will not have to pay UK tax.
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Old Apr 16th 2014, 11:35 pm
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Default Re: UK Pension and income drawdown

Originally Posted by malch
Agreed. However, in the case of my FSAVC's I think I can establish a cost basis and avoid tax on at least some withdrawals (maybe not the 25% lump sum). I've only glanced at the rules so far -- I ordered the applicable booklets from IRS for study.
Looking ahead...be sure to get IRS pub. 939 and 575
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