Reading up on UK defined contribution pension as I might need to do something fairly quickly. I have almost £ 1 million in my defined contribution pension with Aegon Scottish Equitable. I am 55 years old.
The problem is : if I relocate to India, India does not recognize the 25% tax free lumpsum of UK pension, unless I do QROPS. I am not interested in QROPS at this time.
I suppose I could take Uncrystallised funds pension lump sums (UFPLS) in small chunks without any commitment : So for example, assuming I am not employed, I could take £ 16,000 per year. As per UK tax law , I would get 25% = £ 4000 tax free and the remaining 12,000 would fall below personal allowance, therefore the entire £16,000 would be tax free. In India, I would pay close to 10% on £16,000 income. I saved 40% on the way in, so I guess 10% is not too bad. The problem is : I might have other income from dividends and interest so it might push me to 30% bracket.
I have a crazy idea to crystallize say £ 960,000 and take the 25% tax free lumpsum of £ 240,000 which means £ 720,000 goes into drawdown. I havent fully understood what all drawdown entails but am I then forced to draw down at a set frequency every year ? Or can I leave it untouched and invested ?
What flexibility do I lose with drawdown ? I suppose I cannot make further pension contributions ?
In my scenario where I dont know where I will end up, maybe India, maybe Greece, God knows, and given that UK climate is probably not going to suit me healthwise, is it a wise move to just grab the tax free lumpsum, as much as I can before I become tax-resident in a country which does not respect UK's tax free lumpsum rules ?
Thanks.
The problem is : if I relocate to India, India does not recognize the 25% tax free lumpsum of UK pension, unless I do QROPS. I am not interested in QROPS at this time.
I suppose I could take Uncrystallised funds pension lump sums (UFPLS) in small chunks without any commitment : So for example, assuming I am not employed, I could take £ 16,000 per year. As per UK tax law , I would get 25% = £ 4000 tax free and the remaining 12,000 would fall below personal allowance, therefore the entire £16,000 would be tax free. In India, I would pay close to 10% on £16,000 income. I saved 40% on the way in, so I guess 10% is not too bad. The problem is : I might have other income from dividends and interest so it might push me to 30% bracket.
I have a crazy idea to crystallize say £ 960,000 and take the 25% tax free lumpsum of £ 240,000 which means £ 720,000 goes into drawdown. I havent fully understood what all drawdown entails but am I then forced to draw down at a set frequency every year ? Or can I leave it untouched and invested ?
What flexibility do I lose with drawdown ? I suppose I cannot make further pension contributions ?
In my scenario where I dont know where I will end up, maybe India, maybe Greece, God knows, and given that UK climate is probably not going to suit me healthwise, is it a wise move to just grab the tax free lumpsum, as much as I can before I become tax-resident in a country which does not respect UK's tax free lumpsum rules ?
Thanks.
Statistics: Posted by bluejeansman — Sun May 26, 2024 11:21 am — Replies 3 — Views 280