Taking pension pot

[Deleted User] · 21 February 2018 at 2:04PM

Hi folks.

Mrs Wild Rover took early retirement and is in receipt of a Teaching pension. As she spent part of her time working in the private sector, she has another small pension pot that she is deciding what to do with.

She understands that she can lift 25% of the pot as a tax-free lump sum, and is considering taking the rest in cash as well, in the knowledge that there will be a tax liabiity.

She has been told that the company holding the pot is required to deduct income tax from the other 75% at the higher tax rate. If she takes the whole pot as a cash sum in the present tax year, anyone know how long she would wait for the overpayed tax to be repaid? Presumably she could submit a 2017-18 tax return within days of tbe start of the 2018-19 tax year?

Cheers.

WR

Dazed_and_confused · 21 February 2018 at 2:06PM

What reason does she have to file a tax return?

MallyGirl · 21 February 2018 at 2:11PM

you can just contact HMRC - no need to file a return just for that.

Maybe she should at least split the 75% withdrawal across the tax year boundary in April - not that long to wait for the second amount. Not worth it if her pension already has her paying 20% tax though.

Linton · 21 February 2018 at 2:28PM

https://www.gov.uk/claim-tax-refund/you-get-a-pension

The tax taken on a total lump sum will be on the assumption that the same income will be received every month for a year. Or as PAYE works, the allowances and tax bands are divided by 12 and applied separately for each month. Depending on the numbers this could put you well into the Extra tax regime.

[Deleted User] · 21 February 2018 at 3:56PM

Dazed_and_confused wrote: »

What reason does she have to file a tax return?

She has income from her pension which is taxed at source, but also from Carers Allowance, which is taxable and paid gross. Bit of a pain, but that's the way it is paid.

WR

Dazed_and_confused · 21 February 2018 at 4:39PM

Well if she's filing in a return anyway then that's the simplest, and probably quickest, way of getting any refund that's due.

wooder · 22 February 2018 at 10:00AM

Not quite the same but I took the whole of my tax free allowance (£11.5k) immediately after 5th April last year and the pension company stopped over £3.5k in tax as HMRC assumed I would be taking £11.5k every month. I knew this would happen so I reclaimed the tax using form P55 but it was a complete faff and took nearly 3 months to get it back. They didn't pay me back any interest.

Initial phone calls prompted the reply that it takes a few weeks to process, so just wait. After six weeks I finally got through to someone who went and dug out my paperwork and said 'right, I've found your completed application I'll submit it straight away for processing - you should get the refund in a few weeks time !' :doh:

Presumably my application had just been left to gather dust for the first six weeks

Taking pension pot

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