Tax free lump sum

rubble2
rubble2 Posts: 548 Forumite
Name Dropper First Post First Anniversary
in Pensions, annuities & retirement planning
If you have a pension pot that would allow you to take up to £18,000 as a tax free lump sum, is it possible to take a smaller initial lump sum payment and then take further payments up to the £18k limit within the same tax year whilst still leaving the residue of the pension pot unclaimed?

Thanks

Comments

  • dunstonh
    dunstonh Posts: 116,252 Forumite
    Name Dropper First Anniversary First Post Combo Breaker
    Yes, it is in a slightly different way and assumes it is a 25% TFC payment and not a plan with protected tax-free cash entitlement.

    The transaction you are doing is called drawdown and involves part crystallising the fund and drawing 25% of that part with zero income. Then repeating each time until the pension is fully crystallised.

    It isnt a monetary limit that applies. it is a percentage that matters. e.g. crystallise 10% in 10 different dates and you get 100% crystallised. The values with each crystallisation will be different due to investment returns. So, the value may allow £18000 at the start but if the value of the remaining uncrystallised pot goes up, you can draw a higher amount.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • xylophone
    xylophone Posts: 44,286 Forumite
    Name Dropper First Anniversary First Post
    If you have a pension pot that would allow you to take up to £18,000 as a tax free lump sum, is it possible to take a smaller initial lump sum payment and then take further payments up to the £18k limit within the same tax year whilst still leaving the residue of the pension pot unclaimed?

    Consider whether you would be affected by MPAA and if it would concern you if you were.

    https://www.pensionsadvisoryservice.org.uk/news/the-money-purchase-annual-allowance-is-dropping-to-4000-how-does-it-affect
  • Mnd
    Mnd Posts: 1,699 Forumite
    First Anniversary Name Dropper First Post
    If you are only taking the tax free lump sum, then you can disregard the MPAA I think
    No.79 save £12k in 2020. Total end May £11610
    Annual target £24000
  • xylophone
    xylophone Posts: 44,286 Forumite
    Name Dropper First Anniversary First Post
    If you are only taking the tax free lump sum, then you can disregard the MPAA I think

    Yes - I was just drawing attention in case he considers UFPLS.

    https://www.pensionsandannuities.co.uk/Uncrystallised_funds_pension_lump_sum.htm
This discussion has been closed.
★ ★ ★ Meet your Ambassadors

Categories

  • All Categories
  • 343K Banking & Borrowing
  • 250K Reduce Debt & Boost Income
  • 449.6K Spending & Discounts
  • 235.1K Work, Benefits & Business
  • 607.7K Mortgages, Homes & Bills
  • 173K Life & Family
  • 247.7K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.9K Discuss & Feedback
  • 15.1K Coronavirus Support Boards