Defined contribution pension -> Drawdown SIPP

Foraminiferum

I suspect I know the answer to this one, but am hoping for confirmation from someone more knowledgeable than me. My question follows the recent pension announcements.

I closed down a defined contribution pension plan, took the 25% tax-free lump sum, and invested the remainder in a flexible-drawdown SIPP. I haven't taken any money out of this yet.

When I come to withdraw money out of the SIPP, I presume that the full amount withdrawn will be taxed at my marginal rate, and there is no question of any further 25% lump sum?

Thanks.

Linton

Foraminiferum wrote: »

I suspect I know the answer to this one, but am hoping for confirmation from someone more knowledgeable than me. My question follows the recent pension announcements.

I closed down a defined contribution pension plan, took the 25% tax-free lump sum, and invested the remainder in a flexible-drawdown SIPP. I haven't taken any money out of this yet.

When I come to withdraw money out of the SIPP, I presume that the full amount withdrawn will be taxed at my marginal rate, and there is no question of any further 25% lump sum?

Thanks.

Correct. Your pension is now "crystallised". Any withdrawn money will be treated as additional income and taxed accordingly.

kidmugsy

Foraminiferum wrote: »

I closed down a defined contribution pension plan, took the 25% tax-free lump sum, and invested the remainder in a flexible-drawdown SIPP. I haven't taken any money out of this yet.

When I come to withdraw money out of the SIPP, I presume that the full amount withdrawn will be taxed at my marginal rate, and there is no question of any further 25% lump sum?

Personally I loathe the common use of "at my marginal rate": I think it clearer and more accurate to say it will be taxed as income in the usual way. You're quite right about the Pension Commencement Lump Sum, though; you've used it up already.

It seems you can avoid this tax, though: just leave the loot untouched until you die, and if that unhappy event occurs before your 75th birthday, your nominated recipient of the pension will be able to extract the money tax-free. Why do canoes and Panama come to mind?

Foraminiferum

Thanks to both of you; it was as I feared and expected!