Note that un-crystallised, Money Purchase benefits will be left un-crystallised (within the money purchase wrapper) for as long as possible, to be used (by default) on an As Needed basis. As a consequence, the software now defaults to taking any withdrawals as (a series of) 'Uncrystallised Funds Pension Lump Sum' (UFPLS) withdrawals, sufficient only to meet any outstanding expenses.
This specific guide is intended, by contrast, for situations where one intends to crystallise 100% of the money purchase benefits, for the purpose of releasing all available tax-free cash, with the remaining 'taxable' portion being deposited into 'Flexi-Access Drawdown' (FAD), to be used as and when needed (if at all).
Step One: Withdraw all available tax-free cash
In the Money Purchase screen, select the relevant account, in the Ledger, on the right. Under Withdrawals & Annuity, select the option Crystallisation of Money Purchase.
As illustrated above:
- Ensure the option labelled Apply Crystallisation Instructions is ticked.
- Set Crystallised Amount to '100% of Account Value'.
- Set Lump Sum to '25%'. It follows that the remaining 75% will be credited to the Flexi-Access Drawdown account.
- Set Frequency to 'One Time'.
When you are done, hit OK and Update.
Step Two: Consider taxable income from pension drawdown:
To recap, the software's default assumptions are:
- Crystallised benefits that are not withdrawn immediately as a 'lump sum', will be deposited into Flexi-Access Drawdown.
- For each Money Purchase account, the software will automatically create an associated, but empty, pension drawdown account, into which taxable, crystallised benefits can be subsequently deposited.
- From the pension drawdown account, the default assumption is that taxable benefits will be withdrawn on an 'as needed' basis.
Unless one wishes to depart from these assumptions, no further action is needed. In terms of what happens to the benefits held in pension drawdown, there are essentially two broad options:
- Allow the software to withdraw income 'as needed', and/or schedule a pre-determined level of taxable income from pension drawdown.
- Amend the settings to prevent, or constrain the software's ability to withdraw income from the pension drawdown account.
Option One: To schedule a pre-determined level of taxable income from the pension drawdown account, one would do this via the Planned Withdrawals screen, as described here >>>
Option Two: To prevent, or constrain the software's ability to withdraw income from the pension drawdown account, one would navigate to the Pensions > Drawdown Pension screen, and select the relevant 'drawdown' account in the Ledger, on the right-hand side.
Now, open Withdrawal Limit & Annuity > Withdrawal Limit, as illustrated below:
As shown here, one could set the Yearly Drawdown Amount to 'None'. This will have the effect of ensuring that crystallised benefits are preserved, i.e. remain unused, for the duration of the plan, to be left for one's intended beneficiaries.
Alternatively, one could leave the default 'as needed' setting in place, but select a later event (i.e. at some point after the individual's Retirement) from the 'dropdown' menu, labelled 'Yearly Withdrawal Limits'. Selecting a later event would prevent any withdrawals from occurring prior to the selected event, i.e. this is how one might defer (rather than prevent) the taking of taxable income, from pension drawdown. As shown, there are other options that constrain the software's ability to withdraw unlimited amounts of taxable income.
Finally, should it be necessary - subsequently, i.e. at some later event, on the client's Timeline - to amend (tighten, or relax) the Withdrawal Limit settings you've initially put in place, this can be done via Advanced Settings > Step-Up/Step-Down.
Last updated 6 March 2019, Release 5.0.3