Retirement Planning: withdraw full tax-free cash - with or without deferral of taxable income **AdviserGo, UK**

Uncrystallised 'Money Purchase' benefits will be left uncrystallised (i.e. will be preserved) within the Money Purchase wrapper for as long as possible, to be used (by default) on an As Needed basis. As such, the software's default is to withdraw only the minimum funds needed to meet your clients' expenditure, and it will do so via (a series of) 'Uncrystallised Funds Pension Lump Sum' (UFPLS) withdrawals.

This particular guide - by contrast - is intended for situations where one intends to withdraw full tax-free cash, by fully crystallising the benefits held within a given Money Purchase account. Of course, the remaining 'taxable' portion of the benefits will be deposited into 'Flexi-Access Drawdown' (FAD), to be used as and when needed (if at all).

Step One: Withdraw all available tax-free cash 

Under Crystallisations for the money purchase pension, toggle the 'Apply Crystallisation instructions' to on 

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Then click 'Add Crystallisation

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As illustrated above:

  1. Ensure the option Apply Crystallisation Instructions is on.
  2. Set Crystallised Amount to '100% of Account Value'.
  3. Set Lump Sum to '25%', or 'Tax-Free Cash Only'. It follows that the balance of funds will be deposited into the Flexi-Access Drawdown account.

When you are done, hit check the crystallisation timing is set to an event in the year you want the tax free cash lump sum, then click 'Save' and then 'Save' again.

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Step Two: Consider taxable income from pension drawdown:

To recap, the software's default assumptions are:

  1. Crystallised benefits that are not immediately payable to the client, as a 'lump sum', will (automatically) be deposited into Flexi-Access Drawdown.
  2. For each Money Purchase account, the software will automatically create an associated, but empty, pension drawdown account, into which taxable, crystallised benefits can be deposited.
  3. From the pension drawdown account, the default assumption (likewise) is that taxable benefits will be withdrawn on an 'as needed' basis.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 deposited to the Flexi-Access Drawdown account, there are essentially two broad options:

  1. Allow the software to withdraw income 'as needed', and/or schedule a pre-determined level of taxable income from pension drawdown.
  2. 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 Flexi-Access Drawdown account, one would do this via the Planned Withdrawals section, as described here >>>

Option Two: To prevent, or constrain the software's ability to withdraw income, via Flexi-Access Drawdown, one would navigate to the Pensions and select the relevant Drawdown Pension.

Now, open Withdrawal Limit, as illustrated below:

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As shown here, one could set the Withdrawal Type to 'Do Not Allow'. 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) to indicate when the limit starts. Selecting a later event would have the effect of preventing 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.