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NoSo 1 3rd would be subject to tax and 2 3rds not ?
They definitely don't give the advice the OP wantsTry the pension wise site, free advice from a government backed scheme
Ah cheers bud,been in touch with a financial advisor ,they are going to get back to meFor DB (final salary) pensions i don’t think you can take the 25% tax fee lump sum in drive and drabs.
For DC you can usually take it in stages, although some workplace pensions may have different rules, so you will need to check. I turned 55 recently and transferred my previous workplace pension into my SIPP to consolidate various pensions into one place and last week I moved a smallish portion of the overall pot into drawdown.
So in the case of @jaraarrow, if he wanted to take £7500 tax free cash to go on a family holiday he would need to move 30k of his pension into drawdown. The tax free 25% cash would go straight to his bank account and the remaining 22.5k would go into his pension drawdown pot of taxable cash. However, If he is no longer working then he can potentially take an income of £12570 per year tax free from this drawdown pot using his personal income tax allowance. If he is still working then this would be taxable at 25% or even 40% plus depending on his salary so needs to be aware of this, and there would also be potential limits as to how much of his salary (currently 10k per annum, but Labour have said they will reduce to 4k) that he could continue to pay into his work pension.
After moving 30k into drawdown and taking 7.5k of this as tax free cash, the rest of his pension is just left untouched (uncrystallised) and will continue to grow (hopefully). At some future stage he can repeat the drawdown/crystallisation process, but only drawing down what he needs and taking 25% of the amount as tax free cash each time.
For me personally I would not drawdown/crystallise the full pension in one go as i want to leave as much as i can uncrystallised so that the uncrystallised pot grows along with the size of any 25% tax free amount that I will take in the future.
I am not a Financial Advisor, so all the above is simply my own take on the rules following reading around the subject and my understanding may not be correct.
Additionally, what is best for each individual all depends on their personal circumstances e.g are you still working, do you have other investments eg ISAs, do you want to use the lump sum to pay off a mortgage etc etc etc.
As already mentioned by @hoolio earlier in this thread it is recommended that you arrange either a phone or a face to face meeting with Pensionwise which is a free service provided by the government. Do this before making any decisions, as some pension decisions tend to be irreversible. You may also benefit from paying for advice from a licensed Financial Advisor.
There is also a financial advisor called James Shack that has a YouTube channel who explains all the options and potential pitfalls in his videos and I have found these useful.
Must be DC I've never heard of a DB where you can take the tax free element in dribs and drabs
Mine was a final salary defined benefit pension scheme, which meant what I get is based on the maximum I was earning when I left. If I’d decided to work part time - or for some other reason my salary decreased, a career average might have been better. But, like I say, I left that company in about 98/99 after about 10 years. But it still provides a reasonable amount and contributes well to my final full pension amount. In the latter days of my employment I was able to transfer to a final salary db scheme after 5 years in a dc. I transferred the benefit of the dc scheme into a larger pot derived from savings and other transfers and it contributes a smaller amount (my choice) to the final amount I draw down every month. Thats the pot that Truss fucked up and is still in recovery. Fortunately I don’t totally rely on it.Yea they are dc pensions
I would say my salary was average, but when I hit 50 I upped my contributions as I knew I could take £ from my pension when I hit 55. I made the choice to do that and was able to do that by for example keeping my previous car for 15 yrs, so I think it’s a good idea to be in control of your own finances and make your own choices about what to do with your own money. I would say it’s not a tax boost anyway, it is money that I have earned, and I get to keep more of it if I put it into a pension.The Government have made a big mistake allowing people to withdraw money from their pensions tax free (with the pre-tax boost amount when paid in) to just pay for luxuries like the o/p's holiday instead of keeping it for retirement, it's basically subsidising foreign holidays (even more with the zero tax on aviation fuel).
What's to stop someone paying as much as they can in to their pension in their early 50s & then withdrawing the max at age 55 with the 20% or 40% (or is it 25%/50%?) boost? It's not like the Tories to create tax dodging schemes for the relatively rich...
Check on type of pension as once you draw out of one the value you can add voluntarily on any you have drops dramaticallyJust turned 55 and have 2 workplace pensions that I can access if I want to .
One pension is much bigger than the other and has grown 23 per cent in the last year,the other is smaller and has 5 per cent growth in the same period
Was thinking of accessing one of them with partial pension encashment option to treat the family to a nice holiday abroad,so basically taking my 25 per cent tax free in smaller parts but leaving the rest invested still to grow.
Which one would be the best pension to access?
Yes, that's a good point to bear in mind.Check on type of pension as once you draw out of one the value you can add voluntarily on any you have drops dramatically
Folk like to put big cash lumps in the last few years for your instant 25% from the government. So 60k allowance drops to 5k ( rough number )
That last paragraph is what people should be doing 50 ,55 onwards .The Government have made a big mistake allowing people to withdraw money from their pensions tax free (with the pre-tax boost amount when paid in) to just pay for luxuries like the o/p's holiday instead of keeping it for retirement, it's basically subsidising foreign holidays (even more with the zero tax on aviation fuel).
What's to stop someone paying as much as they can in to their pension in their early 50s & then withdrawing the max at age 55 with the 20% or 40% (or is it 25%/50%?) boost? It's not like the Tories to create tax dodging schemes for the relatively rich...
The Government have made a big mistake allowing people to withdraw money from their pensions tax free (with the pre-tax boost amount when paid in) to just pay for luxuries like the o/p's holiday instead of keeping it for retirement, it's basically subsidising foreign holidays (even more with the zero tax on aviation fuel).
What's to stop someone paying as much as they can in to their pension in their early 50s & then withdrawing the max at age 55 with the 20% or 40% (or is it 25%/50%?) boost? It's not like the Tories to create tax dodging schemes for the relatively rich...
Also if a higher rate tax payer when working it's most likely you will be a basic rate payer on retirement so it also saves tax in what when you are over 50 is a short to medium term savings plan.I would say my salary was average, but when I hit 50 I upped my contributions as I knew I could take £ from my pension when I hit 55. I made the choice to do that and was able to do that by for example keeping my previous car for 15 yrs, so I think it’s a good idea to be in control of your own finances and make your own choices about what to do with your own money. I would say it’s not a tax boost anyway, it is money that I have earned, and I get to keep more of it if I put it into a pension.
Apart from the tax free sum I will still have to pay tax on the rest of the money that I take from my pension. It’s more of a tax deferral than anything else as I will pay more tax when I’m retired rather than when working.
Always is on these type of threads.Lots of duff posts on here.
Not working atm but looking for another jobIs the OP about to retire or still working ?
Haven’t read all the thread mate , pretty sure though if you drawdown from a DC pension and still working you’re then restricted massively on what can pay into your pension , including employer contributions , only reason why asked incase didn’t realiseNot working atm but looking for another job