pension withdrawal

paul_stevens

in the past ihave withdrawn from my pension qualifying for my 25% tax free allowance.Now according to Martins site every amount you withdraw from your pension pot you can get the 25% tax free allowance but my pension provider,AEGON,has said this is not so so has anyone out there got any answers for me.Thanks.

Linton

Its either 25% now or 25% later, not both. Once you have taken a 25% of everything tax free lump sum you cant get anything more.

dunstonh

You crystallised your pension into drawdown (either capped or flexible) and took 25% as a lump sum and set your income to nil. When you start taking an income from it (in any way) you dont get another 25% as you have already taken it.

The article on this site is about people who have not yet crystallised their pension and taking 25% in chunks over the years is one of the options (it was one of the options before as well, its not a new one).

jamesd

paul_stevens wrote: »

in the past ihave withdrawn from my pension qualifying for my 25% tax free allowance.Now according to Martins site every amount you withdraw from your pension pot you can get the 25% tax free allowance but my pension provider,AEGON,has said this is not so so has anyone out there got any answers for me.Thanks.

This is possible under both of the main options but Aegon may not have explained this or may not have the relevant options available in their product, in which case you could transfer.

The main options are either:

1. Uncrystallised funds pension lump sum (UFPLS). 25% tax free, 75% taxed. Only available from the part of a pension pot that has had nothing taken from it yet, an uncrystallised pot. You don't have to take a whole pot at once, you can do it in as many chunks as you like.

2. Flexi-access drawdown. Up to 25% tax free lump sum at the start then any portion of the remaining 75% whenever you like as taxable income. You don't have to put a whole pot into this at once, you can do it in pieces if you like.

Whichever you do, you only get the 25% tax free lump sum once. Then the part of the pot involved is marked as crystallised and you can't do it again.

You can't say take a UFPLS from the 75% taxable pot left after entering flexi-access drawdown. Instead you'd have to take the same amount as a taxable amount.

If you want a regular income the main options are:

1. Deferring claiming your state pension. This causes it to increase by 10.4% per year of deferral for those reaching state pension age before 6 April 1016, 5.8% for those after that. Both increasing with CPI inflation, the 10.4% mostly inheritable by a spouse, the 5.8% not inheritable. This typically pays more than an annuity would pay and more than can prudently be taken using drawdown income.
2. Drawdown, leaving the money invested and taking an income from investments. A commonly used value that has a low chance of having to drop the income later is 4% of the initial pot size, increased with inflation each year.
3. Buying one or more annuities. Typically pays much less income for the money than deferring the state pension but available well before the state pension age. Not very efficient before age 75-85 when they can become good value compared to drawdown or state pension deferral. payouts are particularly poor long before state pension age, when drawdown is likely to be the best choice for many people.
4. A mixture of these, like drawdown then state pension deferral then annuity purchase at age 85 or older, perhaps.