Ask the Experts: Drawdown arrangements?

Question: I started a drawdown arrangement two years ago and I have another policy maturing this year. Can I transfer the proceeds into my existing arrangement, and save me having to start a new one?

Answers:

Fiona Tait - Scottish Life

The legislation does not prevent your transferring your second pension plan into the first one before it matures - i.e. you have not yet taken any benefits from it.

If benefits have already been paid from the second policy then it is not possible to amalgamate them as HMRC require that income drawdown plans can only be transferred into plans which "no other sums or assets are held at that time. In effect, it has to be dedicated for the purpose of the transfer." This is to ensure that benefits, specifically the lump sum, are not paid out twice.

Vince Smith-Hughes - The Prudential

"We would transfer the fund into a new tranche under the plans umbrella, which means our fund discounts would apply across all arrangements. This means that the new fund would have its own GAD review date. The advantage of this is that the existing drawdown funds maximum income is unaffected which it could otherwise be if it was paid into the same tranche."

Stewart Dick - Hornbuckle Mitchell

As with any aspect of retirement planning the first thing we'd say is that you should seek advice from a financial adviser to ensure that any decisions taken are the right ones for you.

As for the issue itself, it's important to check how your pension provider will administer the plans. Once you've drawn benefits from second arrangement it won't be possible for it to be combined with the first arrangement - however a provider can operate the two drawdown arrangements under the same plan, so keeping costs to a minimum - it's important for you and your adviser to discuss the mechanics of this with your pension provider.

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