Summary
Flexi-Access Drawdown is treated as a crystallized pension pot in Timeline.
The platform allows for flexible retirement income, letting the pot remain invested.
Timeline provides options to account for previous crystallizations and remaining Lifetime Allowance.
Introduction
Flexi-Access Drawdown is a popular method for drawing retirement income while keeping the pension pot invested. In Timeline Planning, this is treated as a crystallized fund, meaning the tax-free lump sum element has already been tested against the member’s Lump Sum Allowance (LSA). This article explains how to set up and manage a Flexi-Access Drawdown in Timeline Planning.
Setting up a Flexi-Access Drawdown
For advisors using Timeline, the platform allows for the designation of funds to provide a drawdown pension. You’ll need to set up an Uncrystallized account and a Flexi-Access Drawdown account. Then, you can create a transfer from the Uncrystallized account to the Flexi account.
25% of the crystallized amount will be received as a tax-free lump sum (subject to the member’s available LSA).
The remaining 75% will be transferred to the Flexi-Access Drawdown account, to be taxed upon withdrawal.
Example 1: Not Previously Crystallized Pension Pot
Let’s assume John has £400,000 in his Uncrystallized account with 100% of his Lump Sum Allowance available (£268,275). John wishes to crystallize the entire sum. He will receive £100,000 tax-free (25% of £400,000), reducing his available LSA to £168,275. The remaining £300,000 will be designated to the Flexi-Access Drawdown account, to be taxed upon withdrawal.
Example 2: Already Crystallized Pension Pot
John initially had £1,000,000 in his Uncrystallized account and crystallized £500,000, using £125,000 of his LSA. He designated £375,000 to the Flexi-Access Drawdown account. In Timeline, you can adjust the remaining LSA (e.g. to £143,275) to reflect what is still available for future crystallizations.
Spending from Flexi-Access Drawdown
Withdrawals from the Flexi-Access Drawdown are fully taxable. For example, if John receives £10,600 from his State Pension and wants a total annual spending of £70,000, he would need to withdraw £59,400 from his Flexi-Access Drawdown. This amount will be taxed on top of his State Pension.
Conclusions
Timeline Planning offers a flexible approach to managing Flexi-Access Drawdowns, whether you are just starting to access your pension or have already used part of your Lump Sum Allowance. Understanding how these are modelled in Timeline can help you make more informed decisions about retirement planning.