Taking Pension out at 55

farquarpigmix

jamesd wrote: »

Your plan reduces the amount that you get when you are younger. If you want to get out as much as you can while young you should do something like this instead:

1. Take out the £23,000.
2. Make a pension contribution of £17,600 net. Basic rate tax relief will be added to increase this to £22,000 in the pension.
3. Spend whatever is left from the lump sum.

4. Sometime after 6 April 2016:
a. take out a 25% tax free lump sum of £5,500. Make a pension contribution of £4,400 net. This will be increased to £5,500 by the pension tax relief. Spend the remaining £1,100 from the tax free lump sum.
b. Put the remaining £16,500 into flexible drawdown and ask for a monthly taxable income of £1,375. You will receive net payments of £1,100.
c. Set up a monthly direct debit or standing order to pay £1,100 into the pension using the £1,100 monthly income you're getting. This is grossed up to £1,375 by the pension tax relief, making £16,500 a year. Combined with the £5,500 from the lump sum this totals gross £22,000 into the pension during the year.

5. Leave this running each year from now on.

You're now getting an extra £1,100 tax free each year to spend and you can still take out the rest whenever you retire.

However, as ffacoffipawb mentions below, you can't actually pay in more than £10,000 gross after you take more than the initial 25% tax free lump sum, so you can either choose to get a bigger tax break by taking out and recycling only the 25% or reduce the amounts paid in so that you get £500 a year tax free instead.

But am not 55 until October 2016? I don't want to put money back in. I want to get it out.

coyrls

farquarpigmix wrote: »

But am not 55 until October 2016? I don't want to put money back in. I want to get it out.

It was a suggestion for a way of getting more out. I'm not sure that you've thought through your plan.

jamesd

farquarpigmix wrote: »

But am not 55 until October 2016? I don't want to put money back in. I want to get it out.

So you wait until then to get started. I've described how you can get more out in total by taking £500 a year tax free from HMRC and being patient about not getting all of the capital at the start. Just recycle every year and collect the free money.

slopemaster

I dont think you said what type of pension or what its invested in.

But if its in stocks and shares then now might not be the best time to get it out. Of course it might have recovered by october. If it does, and if thats an option you have, you should probably move it to something safer within the pension, before you take it out.

IA definately NAE, and others on here can advise better than me - but I dont think anyones mentioned this point yet.