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pension tax implications?

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Does anyone know what the tax implications are from April 2015 for taking pension pots?

I already draw a final salary pension and Instead of an annuity I plan to take my pot next year at 57 yrs old and use it to fund my retirement until 65 when I draw another final salary pension then at 66 my state.
I don't want to believe that I have a pot of money only to find the tax man rakes a chuck off. My plan would be to top up my income by about £5k per year from the pot,

Thanks
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Comments

  • jamesd
    jamesd Posts: 26,103 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Usual 25% tax free lump sum. The remainder is added to your taxable income in the year in which you take it.

    I suggest that you always take out enough to use your income tax personal allowance fully and put any excess into a S&S ISA to produce ongoing tax free income once you get the final pension.
  • alanbee
    alanbee Posts: 7 Forumite
    That was my other concern,

    If I took the pot (which is around £83k) where do I put the cash to ensure it stays tax free. If I top up my income from the pot, how does the taxman know how much I am taking and hence how much to tax me?

    Alan
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    alanbee wrote: »
    If I top up my income from the pot, how does the taxman know how much I am taking and hence how much to tax me?

    In my experience the provider subtracts basic rate tax from the non-tax-free bit. You then sort out the details with HMRC.
    Free the dunston one next time too.
  • xylophone
    xylophone Posts: 45,607 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    I already draw a final salary pension

    Which uses up your personal tax allowance?
  • jamesd
    jamesd Posts: 26,103 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Pension income payments are handled under PAYE so the pension company will make the usual PAYE reports to HMRC and issue P60 to you at the end of each tax year. Tax is deducted according to the tax code that HMRC sends you and them as usual.
  • Sterlingtimes
    Sterlingtimes Posts: 2,522 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    My post 2015 anxiety about taxation is similar.

    If I take my final salary pension (without the 25%) at age 60 when it is due, can I use increase the pension contribution from my salary by an equivalent amount up to £40,000 without invoking the new £10,000 limit?
    I have osteoarthritis in my hands so I speak my messages into a microphone using Dragon. Some people make "typos" but I often make "speakos".
  • jamesd
    jamesd Posts: 26,103 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 30 July 2014 at 10:48PM
    [STRIKE]We don't know the final rules but no, you won't be able to do that. As soon as you take any pension income your limit is cut to £10,000.

    Some defined benefit pensions increase the amount that they pay if you take them after normal retirement age. Alternatively you can fund the pension contributions at £40,000 a year in a wide range of ways starting before you reach age 60.[/STRIKE]

    Yes, you can take defined benefit pension income without incurring the limit.
  • FatherAbraham
    FatherAbraham Posts: 1,024 Forumite
    Part of the Furniture 500 Posts Combo Breaker
    edited 30 July 2014 at 3:43PM
    jamesd wrote: »
    Some defined benefit pensions increase the amount that they pay if you take them after normal retirement age. Alternatively you can fund the pension contributions at £40,000 a year in a wide range of ways starting before you reach age 60.

    Yes, but that's not much good if one were going to use those annual £40k allowances already.

    You imply that some DBs don't make actuarial increases if commencement is deferred until after normal retirement age. People with those types of benefits will have to choose between losing income and losing £30k of the annual allowance for the rest of their contributing lives.

    This is what I was on about the other day, and everyone seemed to think it wasn't a problem.

    Warmest regards,
    FA
    Thus the old Gentleman ended his Harangue. The People heard it, and approved the Doctrine, and immediately practised the Contrary, just as if it had been a common Sermon; for the Vendue opened ...
    THE WAY TO WEALTH, Benjamin Franklin, 1758 AD
  • greenglide
    greenglide Posts: 3,301 Forumite
    Part of the Furniture Combo Breaker Hung up my suit!
    What about people (like me!) who are already in receipt of a DB pension (LGPS wouldn't let me defer it) and are contributing to a current scheme (DB as well) and AVCs.

    Cutting my allowance to £10k wouldn't be very nice at all.
  • Sterlingtimes
    Sterlingtimes Posts: 2,522 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Thank you, Jamesd and Father A.

    My general concern is that the DB pension imposes upon me income at 60 that I do not want until I stop work. The rules do not appear to provide for deferment. With a DC pension, deferment is mechanical.

    If the new £10,000 limit applies to both DB and DC pensions (and I am not sure that that is the case) then there needs to be a fair mechanism to stop the DB pension without compromising its value. The DB pension becomes a tax disbenefit.
    I have osteoarthritis in my hands so I speak my messages into a microphone using Dragon. Some people make "typos" but I often make "speakos".
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