Partial Drawdown Transfers to Purchase a Lifetime Annuity

Wildparaplanner

Hi all,

I am doubting my sources now. I was under the impression (based on a provider's literature piece) that the only circumstances you can do a partial drawdown transfer is to either purchase a lifetime annuity or on a pension sharing order.

"However, as with many pension rules, there are exceptions. There are two sets of circumstances that allow drawdown funds to be split: for partial lifetime annuity purchases and for pension sharing orders. Where an existing drawdown fund is being used to purchase a lifetime annuity, a member does not have to use the full drawdown fund. Instead, they can use just part of that drawdown fund to buy the lifetime annuity, with the remainder left in the pension scheme continuing in drawdown"

Is this completely wrong or am I missing something here?

Thanks

les_cameron

Hi

Pedantry incoming.

You can never do a partial drawdown transfer the law requires all the arrangement to be transferred and it all to end up in a new arrangement.

Pension sharing order - technically you're discharging the order not transferring.

Buying an annuity - is not a transfer, the scheme is purchasing an annuity with an annuity provider - the money is not ending up in another scheme so it's not a transfer.

les_cameron

But transfer is always used when talking about the above.

les_cameron

https://www.mandg.com/wealth/adviser-services/tech-matters/pensions/pension-transfers/pension-scheme-transfer#transfers-when-pension-is-in-payment see drawdown bit

Wildparaplanner

Thanks - I did read this as well

From the practical point of view then - The client we are looking at has a Royal London flexi-access drawdown fund - we want to use half of this fund to purchase a lifetime annuity (which when comparing at the time, Canada Life were the best rate) with the remainder staying on Royal London in flexi-access drawdown. How do we go about achieving this or is this just not achievable?

les_cameron

@Wildparaplanner said:
Thanks - I did read this as well

From the practical point of view then - The client we are looking at has a Royal London flexi-access drawdown fund - we want to use half of this fund to purchase a lifetime annuity (which when comparing at the time, Canada Life were the best rate) with the remainder staying on Royal London in flexi-access drawdown. How do we go about achieving this or is this just not achievable?

It is legally possible - it must be a terms and conditions / scheme rules constraint. We would allow it from all our drawdown contracts. I suspect you may have spoken to someone who didn't know what they were talking about or confused it with a Fixed Term Annuity (you cannot partial to them as they are not annuities).

Complain, ask again or transfer to someone else who does allow.

Wildparaplanner

Assuming the scheme will in fact annuitise half of the drawdown pot. Once that lifetime annuity is established, could you then fully transfer the remaining drawdown pot to a fixed term annuity contract?

les_cameron

@Wildparaplanner said:
Assuming the scheme will in fact annuitise half of the drawdown pot. Once that lifetime annuity is established, could you then fully transfer the remaining drawdown pot to a fixed term annuity contract?

Yes - as you would be transferring the whole of the drawdown arrangement to a drawdown arrangement.