Benefits/Drawbacks of taking Tax-Free Cash when it's not needed

edited June 10 in General

Has anyone had any experience or read articles on retirees passing age 75 having not taken PCLS.

We have a client who doesn't need their pension at all, but I wonder if there's merit to drawing the PCLS before he dies? Potentially, for example, he could gift the sum if 7 years longevity is predicted.

Comments

  • NathNath Member

    Immediate thoughts:

    • If they don't take PCLS then die post 75 then subject to marginal rate tax on beneficiary so could they use for regular expenditure and stop other taxable or less tax efficient withdrawals. Also depends on amount I suppose and how quickly they can get out of the estate if not needed.
    • Some providers don't even allow PCLS after 75, even though rules allow so I would check the provider they hold the pension with offers this option.
    • Depends on value of estate from IHT perspective as to whether its worth drawing down
  • @Nath said:
    Immediate thoughts:

    • If they don't take PCLS then die post 75 then subject to marginal rate tax on beneficiary so could they use for regular expenditure and stop other taxable or less tax efficient withdrawals. Also depends on amount I suppose and how quickly they can get out of the estate if not needed.
    • Some providers don't even allow PCLS after 75, even though rules allow so I would check the provider they hold the pension with offers this option.
    • Depends on value of estate from IHT perspective as to whether its worth drawing down

    Thanks.

    I think the main reason to draw the TFC would be to pay to the beneficiary (his children) now. The main 'condition' for that to be advised is whether there is sufficient coverage for LTC ... which in his case there should be.

  • sm2000psm2000p Member

    @arongunningham said:
    Has anyone had any experience or read articles on retirees passing age 75 having not taken PCLS.

    We have a client who doesn't need their pension at all, but I wonder if there's merit to drawing the PCLS before he dies? Potentially, for example, he could gift the sum if 7 years longevity is predicted.

    The only reason I can see for advising someone to take the TFC from a plan where there is no need to drawdown income is if the retiree wants to make an immediate gift to a family member and cannot fund the gift from other assets. Taking money out of a pension will have an immediate IHT effect that would not be the case if the retiree died and passed it to beneficiary.

    Also, assuming there are no Lifetime allowance issues (and potential charges), I believe you can take TFC post age 75.

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