# Withdrawals Business Rules - Plain Language Guide

*A business-friendly overview of how PensionBee's withdrawal systems work, covering rules, processes, and user journeys*

## Table of Contents
- [Overview: What We Offer Customers](#overview-what-we-offer-customers)
- [Customer Eligibility Rules](#customer-eligibility-rules)
- [Two Types of Withdrawals](#two-types-of-withdrawals)
- [The Stronger Nudge Process](#the-stronger-nudge-process)
- [Investment Pathways After Withdrawals](#investment-pathways-after-withdrawals)
- [Security & Verification Requirements](#security--verification-requirements)
- [Tax Rules & Calculations](#tax-rules--calculations)
- [Business Constraints & Limits](#business-constraints--limits)
- [User Experience Flows](#user-experience-flows)
- [Customer Service Guidelines](#customer-service-guidelines)
- [Key Business Decisions](#key-business-decisions)

---

## Overview: What We Offer Customers

PensionBee allows customers aged 55+ to withdraw money from their pension in two ways:

1. **One-off Withdrawals** (legacy system) - Take money out once
2. **Regular Monthly Withdrawals** (new system) - Set up recurring monthly payments

Both systems are designed around strict regulatory requirements to protect customers and ensure they make informed decisions about their pension savings.

### Key Customer Benefits
- **Flexibility**: Take as much or as little as needed
- **Tax efficiency**: First 25% is usually tax-free
- **Guidance**: Regulatory-required support to make informed decisions
- **Investment options**: Choose how remaining funds are invested

---

## Customer Eligibility Rules

### Who Can Withdraw Money?

✅ **Eligible customers must:**
- Be at least 55 years old (rising to 57 in 2028)
- Have a verified bank account on file
- Not currently need regulatory guidance (see Stronger Nudge section)
- Not have an active withdrawal already in progress
- Have sufficient balance (more than any penalty fees)

❌ **Customers are blocked if:**
- Under 55 years old
- Balance too small (less than £150 penalty for new pensions)
- Bank details are being manually verified
- Already have a live monthly withdrawal set up
- Need to complete mandatory guidance first

### Balance Requirements

**Minimum Balance Rules:**
- Must have more than £150 if pension started less than 12 months ago
- Cannot leave less than 7% of original balance remaining (unless taking whole pot)
- Cannot exceed current pension value

**Example:** If you have £10,000 in your pension, you must leave at least £700 remaining (or take the whole £10,000).

---

## Two Types of Withdrawals

### 1. One-off Withdrawals (Legacy System)

**What it is:** Take money out of your pension once, when you need it.

**Customer Journey:**
1. **Learn** → Information about how withdrawals work
2. **Declare** → Tell us about any previous withdrawals from other providers
3. **Calculate** → Choose how much tax-free and taxable cash to take
4. **Verify** → Confirm bank details and identity
5. **Complete** → Choose how to invest remaining money

**Processing Time:** Can take up to 7 working days

### 2. Regular Monthly Withdrawals (New System)

**What it is:** Set up automatic monthly payments from your pension.

**Customer Journey:**
1. **Choose** → Select monthly withdrawal option
2. **Learn** → Information about regular withdrawals
3. **Declare** → Previous withdrawals from other providers
4. **Setup** → Choose bank account from verified options
5. **Calculate** → Set monthly tax-free and taxable amounts
6. **Confirm** → Review and confirm setup
7. **Active** → Monthly payments begin

**Key Difference:** Uses pre-verified bank accounts and existing identity checks, making setup faster.

---

## The Stronger Nudge Process

### What is Stronger Nudge?

A regulatory requirement that ensures customers receive guidance before making significant pension decisions. We must offer this at three key moments:

1. **Sign Up** - When new customers join (if over 50)
2. **Add Pension** - When transferring pensions to PensionBee
3. **Withdrawal** - When requesting to take money out

### When Do We Show It?

**For New Customers & Pension Transfers:**
- Customer is over 50 years old, AND
- No recent guidance completed, OR
- Previous guidance is still active, OR
- New pensions added since last completed guidance

**For Withdrawals:**
- No recent guidance completed, OR
- Previous guidance is still active, OR
- Previous withdrawal completed after guidance, OR
- Previous withdrawal request was cancelled after guidance

### The Guidance Journey

**Step 1: Qualifying Question**
"Are you transferring a pension to access your savings in the foreseeable future?"

**Step 2: Guidance Options**
We offer four choices:
- **Call Pension Wise** - Customer books their own phone appointment
- **Book Online** - Customer books online with Pension Wise
- **We'll Book** - PensionBee books appointment for customer
- **Decline** - Customer opts out (with sub-options)

**Step 3: Confirmation**
Customer must confirm they've received guidance or explain why they're declining.

**Step 4: Risk Assessment**
7 mandatory questions about tax, inheritance, future contributions, and investment risks.

### Business Impact
- Customers cannot proceed with pension transfers or withdrawals until guidance is complete
- Adds regulatory protection but creates friction in user journey
- Must be completed even if customer has received guidance before (if circumstances changed)

---

## Investment Pathways After Withdrawals

### What Are Investment Pathways?

After taking money from their pension, customers must choose how to invest their remaining funds. This is a regulatory requirement when customers "crystallise" their pension (take tax-free cash).

### When Must We Show Investment Pathways?

✅ **Required when:**
- Customer takes any tax-free cash (even £1)
- Haven't already made this choice for this withdrawal
- Not taking their entire pension pot

❌ **Not required when:**
- Taking whole pension pot (nothing left to invest)
- Only taking taxable cash (no crystallisation)
- Already chosen pathways for this withdrawal

### The Five Options

1. **Current Plan** - Keep money in existing investment plan
2. **Tracker** - Low-cost index fund tracking
3. **Pre-Annuity** - Conservative investments preparing for annuity purchase
4. **4Plus** - Growth-focused investments
5. **Preserve** - Capital preservation focused

### Business Rules
- Must be offered immediately after withdrawal completion
- Customer choice is recorded and tracked
- Different redirect destinations based on context (tracker vs withdrawals dashboard)
- History is truncated if it gets too long (database limit)

---

## Security & Verification Requirements

### Bank Account Verification

**Automated Verification (GBG):**
- New bank details are automatically checked
- Most accounts are verified instantly
- Some require manual review

**Manual Verification Process:**
- Required when automated checks fail
- Customer may need to upload bank statement
- Manual team reviews and approves
- Can create delays in withdrawal processing

**States:**
- ✅ **Verified** - Ready to use
- ⏳ **Pending Manual Process** - Under review
- ❌ **Rejected - GBG** - Failed automated checks
- ❌ **Rejected by Customer** - Customer cancelled

### Identity Verification (KYC)

**When Required:**
- First-time withdrawals (usually)
- Can be skipped if previous verification exists
- Uses facial similarity check (selfie + ID)

**Reuse Logic:**
- System tries to reuse previous identity checks
- Links to bank account verifications
- Reduces customer friction where possible

**Provider:** Onfido widget for facial similarity checks

---

## Tax Rules & Calculations

### Tax-Free Allowance (25% Rule)

**Basic Rule:** First 25% of pension pot is tax-free

**New Lump Sum Allowance (LSA) - April 2024:**
- Overall lifetime limit of £268,275 tax-free cash
- Takes precedence over 25% rule
- System blocks withdrawals exceeding remaining LSA

**Example:**
- Pension pot: £50,000
- 25% would be: £12,500
- If LSA remaining is only £10,000, customer can only take £10,000 tax-free

### Tax Code Handling

**Personal Tax Codes:**
- Uses customer's HMRC tax code when available
- More accurate tax calculations

**Emergency Tax Code:**
- Applied when no personal tax code available
- Higher tax rate initially
- Customer settles difference with HMRC later
- Current emergency code: "1257L Week 1/Month 1"

### Money Purchase Annual Allowance (MPAA)

**What Triggers It:** Taking taxable cash above the 25% tax-free amount

**Impact:** Future pension contributions limited to £10,000 per year (down from £60,000)

**Customer Warning:** "Do you intend to pay future contributions in excess of £10,000?"

### Payroll Lock Rules

**Current Rule:** Only one taxable withdrawal per "tax month" (however Euisoft can support multiple taxable withdrawals within the same month)

**Tax Month:** 6th of one month to 5th of the next month

**Business Reason:** Monthly payroll processing system limits taxable withdrawals to once per tax month

**Impact:** If customer takes taxable cash in January, they cannot take more taxable cash until the next tax month period begins (6th of February)

**Exception:** Tax-free withdrawals can be made multiple times - this rule only applies to taxable income

**Note:** The earlier information about Equisoft allowing multiple withdrawals appears to be incorrect based on current customer service procedures

---

## Business Constraints & Limits

### Balance Limits

| Constraint | Rule | Business Reason |
|------------|------|-----------------|
| **Remaining Balance** | Must leave 7% of original balance | Protects against market volatility during disinvestment cycle |
| **Penalty Fee** | £150 for pensions < 12 months old | Discourages frequent transfers |
| **Lump Sum Allowance** | £268,275 lifetime limit | Government regulation (April 2024) |
| **Previous Withdrawals** | Track maximum 5 from other providers | Tax calculation accuracy |

### Processing Constraints

| Constraint | Impact | Customer Communication |
|------------|---------|----------------------|
| **7 Working Days** | Withdrawal processing time | "Can take up to 7 working days" |
| **One Live Request** | Cannot have multiple active withdrawals | Must complete/cancel existing request |
| **Disinvestment Lock** | Cannot cancel once funds are being sold | "Too late to cancel" message |
| **Manual Verification** | Delays for flagged bank accounts | "Additional checks required" |

### Regulatory Constraints

| Requirement | When Applied | Customer Impact |
|-------------|--------------|-----------------|
| **Stronger Nudge** | Age 50+ at key moments | Journey blocked until guidance complete |
| **Investment Pathways** | After crystallisation | Must choose investment option |
| **Risk Warnings** | 7 mandatory questions | Cannot proceed without answering |
| **KYC** | Identity verification | Selfie + ID required |
| **Payroll Lock** | One taxable withdrawal per tax month | Monthly withdrawal frequency limit |

---

## User Experience Flows

### Single Withdrawal Happy Path

Customer Request → Information → Risk Questions → Calculator →
Bank Verification → Identity Check → Summary → Investment Pathways → Complete

**Typical Timeline:** 1-2 days for verification, up to 7 days for payment

### Regular Withdrawal Happy Path

Customer Request → Information → Risk Questions → Bank Selection →
Calculator → Confirmation → Live Monthly Payments

**Typical Timeline:** Same day setup if bank account and ID already verified

### Stronger Nudge Intervention

Any Journey → Guidance Check → [BLOCKS] → Pension Wise Booking →
Risk Assessment → [ALLOWS] → Continue Original Journey

**Typical Timeline:** Adds days/weeks depending on guidance appointment availability

### Common Blocking Scenarios

1. **Age Block** - Under 55 years old
2. **Balance Block** - Less than penalty amount
3. **Nudge Block** - Needs guidance first
4. **Verification Block** - Bank details or ID pending
5. **System Block** - Already has active withdrawal

---

## Customer Service Guidelines

### Eligibility & Basic Requirements

**Age Requirements:**
- Must be 55+ (rising to 57 after 6 April 2028, potentially 58 around 2034)
- UK-based PRA regulated bank account required
- £150 fee applies if pension has been with PensionBee for less than 12 months

**Processing Times:**
- Standard timeframe: 7-10 working days if no verification issues
- Additional time may be needed for bank verification or KYC checks
- Tax-free and taxable payments are made separately

### Common Customer Issues & Business Rules

**"Why is my taxable cash locked?"**
- If customer hasn't taken any tax-free cash, taxable amount is locked
- Unlocks proportionally as they enter tax-free amount
- Business rule: Must crystallise (take tax-free) to access taxable income

**"I want to avoid the £150 fee"**
- System requires leaving 15% behind to avoid fee
- Customer must keep reducing withdrawal amount until fee no longer triggers
- Business rule: Fee applies to full withdrawals within first 12 months

**"How much tax will I pay?"**
- Emergency tax code applied if no personal tax code from HMRC
- Emergency code assumes 12x withdrawal amount as annual income
- Tax refunds typically received around 14th of following tax month
- Business rule: Cannot apply customer-provided tax codes (except P45)

**"I received a different amount than requested"**
- Can happen with "withdraw full amount" requests
- Market movements between request and disinvestment affect final amount
- Business rule: Final amount depends on actual fund value at disinvestment

### Withdrawal Modification & Cancellation Rules

**Changing Withdrawal Amounts:**
- Cannot edit amount once request is submitted
- Must cancel and create new request (if eligible)
- Business rule: No modifications allowed once disinvestment begins

**Cancellation Eligibility:**
- **First withdrawals:** Taxable portion can always be cancelled, tax-free only if not paid
- **Subsequent withdrawals:** Can only cancel if in 'Incomplete Application', 'Proposed', or 'Ready for Trading' status
- **After payment:** 30-day return window for taxable portion of first withdrawal only

**Re-investment Process:**
- Takes approximately 2 weeks
- Customer liable for any market losses during cancellation
- Cannot make new withdrawal requests during re-investment period

### Bank Account & Verification Requirements

**Account Requirements:**
- UK bank account in customer's name
- Must be with PRA regulated bank
- Joint accounts acceptable if statement shows customer as account holder

**Name Matching:**
- Must enter name exactly as held in system
- Cannot use apostrophes (use spaces instead)
- Business rule: Automatic name verification prevents mismatches

**Bank Statement Requirements:**
- Customer's name and address
- Bank header and account details (sort code & account number)
- Dated within last 3 months
- Must be from PRA regulated UK bank

### Tax Code & HMRC Integration

**Tax Code Sources:**
- HMRC provides tax codes after first taxable withdrawal
- Emergency tax code applied if no HMRC notification received
- Only accept P45 from customer if dated within current tax year
- Business rule: Cannot manually apply customer-provided tax codes

**Tax Refunds:**
- Automatic refunds for overpaid emergency tax
- Customer can claim directly from HMRC using forms
- Cumulative tax codes may result in refunds or additional charges

### Frequency & Timing Rules

**Withdrawal Frequency:**
- Tax-free withdrawals: Multiple allowed until fully crystallised
- Taxable withdrawals: One per tax month (6th to 5th of following month)
- Only one withdrawal request can be active at a time

**Timing Considerations:**
- Withdrawals count as processed when payroll runs
- Submit requests well in advance for end-of-tax-year deadlines
- Consider verification and disinvestment time when planning

### Document Generation

**Automatic Documents:**
- **P45:** Generated 1-2 working days after full pot withdrawal
- **Payslips:** Created for taxable withdrawals after payroll processing
- **Schedule of Benefits:** Generated for all withdrawals
- **Drawdown Illustration:** First withdrawal only (if crystallisation percentage is 0%)
- **P60:** Available by 31st May following tax year end

### Key Compliance Messages

**Tax Advice:**
- "We cannot provide tax advice - please consult an independent advisor"
- "Tax calculations are estimates - final amounts depend on HMRC processing"
- "Emergency tax may apply - you can claim refunds directly from HMRC"

**Investment Advice:**
- "We cannot provide investment advice - please consult a financial advisor"
- "Investment Pathways are a regulatory requirement after crystallisation"
- "Consider impact on retirement income before taking large withdrawals"

**Regulatory Requirements:**
- "Pension Wise guidance is required by law for certain transactions"
- "We must verify your identity and bank details to prevent fraud"
- "These processes protect your pension and comply with FCA regulations"

---

## Key Business Decisions

### Product Strategy Decisions

**Two Withdrawal Systems:**
- **Legacy (Single):** Being maintained but not actively developed
- **New (Regular):** Feature-flagged rollout, becoming primary system
- **Migration Strategy:** Gradual shift based on RegWithdrawal feature flag

**Verification Strategy:**
- **Reuse First:** Always try to reuse existing verifications
- **Friction Reduction:** Minimize repeated customer actions
- **Security Balance:** Maintain compliance while improving UX

### Risk Management Decisions

**Balance Protection:**
- 7% minimum remaining balance (down from 20%, then 15%)
- Whole pot option as escape valve
- Clear warnings about leaving too little

**Regulatory Compliance:**
- Stronger Nudge shown conservatively (better to over-nudge than under-nudge)
- Investment Pathways required for any crystallisation
- Tax warnings comprehensive and prominent

### Customer Experience Decisions

**Progressive Disclosure:**
- Simple options first, complexity later
- Clear explanations at each step
- Multiple exit points for confused customers

**Error Handling:**
- Clear error messages in plain English
- Specific guidance on how to resolve issues
- Alternative paths when primary journey blocked

**Communication Strategy:**
- Email BeeKeeper for complex issues
- Phone support for booking appointments
- Self-service where regulation allows

---

## Appendix: Glossary

**Crystallisation** - The process of taking tax-free cash from a pension, which "crystallises" that portion and triggers certain requirements

**Drawdown** - The process of taking money from your pension while leaving the rest invested

**GBG (Great British Group)** - Third-party service that automatically verifies bank account details

**Investment Pathways** - Regulatory requirement to offer investment choices after taking pension money

**KYC (Know Your Customer)** - Identity verification requirements for financial services

**LSA (Lump Sum Allowance)** - New £268,275 lifetime limit on tax-free cash (from April 2024)

**MPAA (Money Purchase Annual Allowance)** - Reduced £10,000 annual contribution limit after taking taxable pension cash

**Pension Wise** - Free government guidance service for pension decisions

**Stronger Nudge** - Regulatory requirement to offer guidance at key pension decision points

**Tax Month** - Period from 6th of one month to 5th of the next month (for withdrawal frequency rules)