4% Minimal withdrawal year 1
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LDFerguson
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The 4% requirement is based on the value of the ARF at 30th November. It's not pro-rated for parts of the year. So, for example, if you start your ARF on 1st November you must still withdraw the full 4% of its value by the end of the year. If you start your ARF in December you don't have to take any income in that year.
Regards,
Liam
www.FergA.com
Regards,
Liam
www.FergA.com
Liam, from experience, do you know if it’s usually acceptable to stall on the setting up on an ARF for a good few months in the same year as retiring. Retire May. Set up ARF December.
I get the impression from the occupational DC administrator that they are okay to just wait for instructions.
Also,
I presume that if I die (hopefully not) after retiring but before the funds leave the DC fund that it would be treated similar to death in service. 4x salary TFLS and balance to buy benefits.
Spouse nomination and Will in place.
Many thanks in advance.
LDFerguson
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Most pension companies are working with serious backlogs at the moment anyway, so claims are taking weeks if not months to process from start to finish depending on the company. Anyway, in practice, there should be no issue at all with you retiring from the job in May and deferring drawing down your DC occupational pension scheme benefits in late November / December.
Occasionally I've seen schemes which automatically switch your fund to cash at normal retirement age, which might or might suit you. You can usually ask to immediately switch back into other fund choices if you'd prefer not to be out of the market.
If you've retired from the job and contributions have ceased to the DC scheme, your fund becomes a "preserved benefit" in the scheme until you draw it down. In the event of your demise during that gap period between May and December, your spouse would inherit the entire fund tax-free without being restricted by the 4 x salary limit. So in the interests of efficient tax planning I would advise that you plan your demise to occur during those months.
Thank you Liam.Most pension companies are working with serious backlogs at the moment anyway, so claims are taking weeks if not months to process from start to finish depending on the company. Anyway, in practice, there should be no issue at all with you retiring from the job in May and deferring drawing down your DC occupational pension scheme benefits in late November / December.
Occasionally I've seen schemes which automatically switch your fund to cash at normal retirement age, which might or might suit you. You can usually ask to immediately switch back into other fund choices if you'd prefer not to be out of the market.
If you've retired from the job and contributions have ceased to the DC scheme, your fund becomes a "preserved benefit" in the scheme until you draw it down. In the event of your demise during that gap period between May and December, your spouse would inherit the entire fund tax-free without being restricted by the 4 x salary limit. So in the interests of efficient tax planning I would advise that you plan your demise to occur during those months.
That’s all very helpful.
The administrator in this case would leave the funds invested while awaiting instructions.
I think I’ll try remain around a bit longer on both points