The benefits of tax-efficient regular income (TRIO)

Yes, we can link fully automated TRIO to clients who are lucky enough to have significant pension pots in terms of size and are inhibited by the lifetime allowance.

We can also offer TRIO for clients who are subject to the majority of lifetime allowance protection (all types of individual protection, all types of fixed protection, enhanced protection going back to 2006 and all forms of lifetime allowance factors).

Duncan is 59 and earns £56,000 a year.

He wants to work a bit less, which would reduce his income to £50,000 a year. He wants an income from his Quilter pension of £500 a month to make up the difference without having to pay tax on that income.

Duncan’s adviser recommends he moves £2,000 out of his pension pot every month, giving him 25% (£500) as tax-free cash and putting the other 75% (£1,500) into drawdown.

When he earned £56,000 Duncan was a higher rate taxpayer. With his reduced hours reducing his income to £50,000 he is now a basic rate taxpayer. After he retires, he expects his income to be lower. So he would rather take tax-free income now to prevent paying higher rate tax and take taxable income from his drawdown pot in the future when he has a lower income. As Duncan’s needs change over time, he can change what he is doing.

Willow is 67 and about to retire.

She wants an income from her Quilter pension of roughly £500 a month to boost what she gets from her state pension and small employer pension.

Willow’s adviser recommends she moves £600 out of her pension pot with Quilter every month, giving her 25% (£150) as tax-free cash and moving the other 75% (£450) into drawdown. Her adviser also asks us to immediately pay this money out to her again as income. This income is taxed.

As her state pension and small employer pension use up all her personal allowance the extra money will mean she is a basic rate taxpayer, so she pays tax at 20%. 20% of £450 is £90. So, after tax, her £450 has become £360. Her total income from her Quilter pension is £360 + £150 = £510 per month.

She’s taking an income, but not building up any money in her drawdown at the moment. As Willow’s needs change over time, she can change what’s she’s doing.