Opt out of SERPS/S2P?

dunstonh

weed10265 wrote: »

dunstonh wrote: »

How do you know if you have a protected scheme as looking over the info I have it does not mention it?

Protected schemes are in the tiny minority of cases. Normally either occupational pensions or section 32 buy out bonds/hybrid schemes.

if its a personal pension or stakeholder pension then it will be 55.

peejay57

Hi guys complete novice to this so apologies in advance. I contracted out in 1991 and I have just had a statement that I have £28000 in my pot. As it is a contracted out pot am I still allowed to take 25% tax free out each year

dunstonh

peejay57 wrote: »

Hi guys complete novice to this so apologies in advance. I contracted out in 1991 and I have just had a statement that I have £28000 in my pot. As it is a contracted out pot am I still allowed to take 25% tax free out each year

No. You cannot take out 25% tax free each year. It is once only that you can take 25% tax free. (caveat on phased drawdown where only part of the pension is crystallised each year).

peejay57

Thanks dunstonh if I were to take out 10k I have to pay tax on rest or am I only allowed to take 25%

jem16

peejay57 wrote: »

Thanks dunstonh if I were to take out 10k I have to pay tax on rest or am I only allowed to take 25%

£7000 would be tax-free and £3000 would be taxed as normal income. Do you have other income this tax year?

peejay57

Thanks Jem16. No other income this year as my partner works I do not get anything.

xylophone

You are aged over 55 but have not yet reached state pension age?

You have no income of any kind?

jem16

peejay57 wrote: »

Thanks Jem16. No other income this year as my partner works I do not get anything.

Then if you are over age 55 and take out £10k, £7k would be tax-free and the other £3k tax-free as it would be covered by your Personal Allowance.

jamesd

While jem16 was right it's not the best way to do it. Instead you should take out £2,500 tax free and £7,500 taxable using either the UFPLS option or flexi-access drawdown of only £10,000, taking 2500 tax free and 7500 taxable from the flexi-access. The UFPLS is automatically 25% tax free and 75% taxable. The reason for this is your personal allowance, which meant that there is no tax to pay on the taxable part anyway because it is less than your unused personal allowance. This leaves £18k of uncrystallised pension pot from which 25% tax free and 75% taxable can be taken later

Doing it in this way preserves more 25% tax free lump sum option for later years when you might have an income that means any taxable portion would cause actual tax to be due.

To do what jem16 described you'd instead put £28,000 into flexi-access drawdown and take out 25%, £7k, as tax free lump sum plus £3k of the remaining taxable £21k. This would leave £18k available in the flexi-access drawdown pot, all of which would be taxable when taken.