April pension pot

CANARY_JOES

Hi i just wondered if any one could answer the query i have on my company pension in regards to new rules coming into force in April.
I will have a pot of £19800 by this time. I am 56 therefore i presume i will be able to cash it in . Obviously i know of tax implications on 75% of the total. When i was 50 i took a small amount of my pension around £2000 around 25% out of the pot. Will this amount effect the total pot (which i would like to have ). thanks

PensionTech

From the figures involved, I'm assuming that you have continued to contribute to the scheme since you took the £2000 out?

If that's the case, then the following will have happened:

1. You will have put the remainder of the existing pot (presumably around £6000 was left) into drawdown, which makes it "crystallised". This means you cannot take any more tax-free cash from it.
2. When you continued to contribute, you will have started contributing to a new pot (whether or not the provider made it clear that it was a separate pot) that is "uncrystallised". You can take tax-free cash from this.

You will be able to draw your money out from both pots - but you will only be able to get 25% of the second pot tax-free. The first pot will all be taxable as income.

So for example: let's say that your crystallised pot of £6000 in 2008/9(?) has grown to £9000 now, including the investment returns. The uncrystallised pot, making up the rest of your total pot, is therefore around £10,800.

You can have 25% of the uncrystallised pot - i.e. £2,700 - tax-free.

The remaining £17,100 (i.e. the £9,000 crystallised pot, and the £8,100 remainder of the uncrystallised pot) will be taxed as income.

CANARY_JOES

thanks for the info. I earn around 21k . Roughly how much tax would taken ? thanks

kangoora

CANARY_JOES wrote: »

thanks for the info. I earn around 21k . Roughly how much tax would taken ? thanks

Roughly, 20% of the money that isn't part of your tax free sum. As long as you don't go over the higher rate limit which will be (assuming standard £10,000 personal allowance) £41,865 - possibly slightly more as it will be a new tax year and allowances will have changed

In the example above, which is an estimate, circa £3.5k

atush

You could pay no tax if y ou waited until you retired to take it?

is this your only pension?