Pensions: tax free lump sums

am_ready_for_it

I am fortunate ( in some ways) to have several pension pots, one of which I am still contributing too) plus a final salary scheme which I intend taking at 60 later this year.
The total value of my pots is circa 40k my question regards the tax free element(25%), is this a yearly allowance or a one off?

dunstonh

You can only crystallise your pension (or that part of a pension) once. I say part because you can phase the cystallisation over a period. e.g. a pot of £40k could see £10k crystalised this year (£2.5k tax free lump sum, 7.5k used for whatever method you want to use), then repeat it for following years until the pot is fully crystallised.

xylophone

Will you be continuing to work? Will you be continuing to make pension contributions from your earned income?

http://www.hmrc.gov.uk/incometax/relief-pension.htm

Have you seen https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/301563/Pensions_fact_sheet_v8.pdf

Do be careful to check that your tax code is correct after you start drawing the pension later this year.

RickyC_IFSWP

Apart from phasing (I.e. crystallising small part of your pot), the tax free cash is a one-off.

On another note, with the new pension access rules proposed, you could withdraw lump sums from your pension in a similar way but this may be taxable depending on your retirement income.

Dunnit

If you part crystallise then what happens if the pot increases or decreases in the following years?

RickyC_IFSWP

Dunnit wrote: »

If you part crystallise then what happens if the pot increases or decreases in the following years?

Without going into exlaining some guaranteed income products, the simplest answer is generally you benefit if the pot increases and lose out if not... i.e. There will be investment risk if the funds are not cash based.