Using part of crystallised drawdown pot to buy a fixed term annuity

PeterM

Hi

I was wondering if anyone has came across this issue before.

We have a client where we have recommended that they use £250k of their crystallised drawdown pot (full pot is valued at £359k and fully crystallised) to buy a fixed term annuity with Canada Life.

Canada Life are saying that their scheme rules won't allow them to accept a partial transfer in from crystallised funds it is either the full pot or nothing.

Is this something in the Pension Tax rules or is it just Canada Life being awkward?

Caro

I suspect it's because fixed term annuities are written under drawdown rules and you can't do a partial transfer of crystallised funds. I think that will apply with any provider, not just Canada Life.

https://www.canadalife.co.uk/retirement/fixed-term-income-plan/product-details/

les_cameron

@Caro said:
I suspect it's because fixed term annuities are written under drawdown rules and you can't do a partial transfer of crystallised funds. I think that will apply with any provider, not just Canada Life.

https://www.canadalife.co.uk/retirement/fixed-term-income-plan/product-details/

I agree with Caro - a fixed term annuity is a very restrictive drawdown contract and pension tax rules do not allow partial transfers of drawdown arrangements.

PeterM

Thanks folks, I appreciate the responses.

A couple of follow up questions;

If the client's existing plan is segmented could we transfer enough segments of the crystallised funds to purchase the Fixed term annuity?

If it isn't could we transfer to a drawdown plan that is segmented and then transfer enough for the fixed term annuity?

les_cameron

Hi

The partial rule works at arrangement level so perhaps, unless the scheme has a scheme level rule - scheme rules rule.

You can't transfer into a segmented plan as all arrangements have to go full to full e.g. going from 1 arrangement to say 5 arrangements is 5 partial transfers.

Calvert76

You can hold some fixed term annuities via a trustee investment plan(TIP) inside a crystallised SIPP, i.e. hold as an investment within the existing arrangement as opposed to arranging a partial transfer. The income can either accumulate or be paid out to the client. Might be an option….