Question about 25% lump sum

talexuser

There are rumours that the 25% tax free lump sum could be for the chop in the budget
https://www.moneymarketing.co.uk/steve-webb-pensions-tax-free-lump-sums-set-for-extinction/

Is it possible to apply for the 25% tax free lump sum now, in this tax year, and then wait until after April 6 and withdraw the rest of the 75% and pay tax on that in the next tax year?

dunstonh

There are rumours that the 25% tax free lump sum could be for the chop in the budget

As there has been every year around budget time since the 25% figure was set back in 1988.

Is it possible to apply for the 25% tax free lump sum now, in this tax year, and then wait until after April 6 and withdraw the rest of the 75% and pay tax on that in the next tax year?

Yes. That transaction is possible on a drawdown plan. 25% now with nil income and full withdrawal next tax year.

kidmugsy

talexuser wrote: »

Is it possible to apply for the 25% tax free lump sum now, in this tax year, and then wait until after April 6 and withdraw the rest of the 75% and pay tax on that in the next tax year?

Yes. Or take the 25% now and leave the rest to grow. Or take the 75% spread over a few years. It's your choice.

talexuser

Thank you for your quick replies. My partner has an old small pension pot of less than 8k she does not need. She wants to cash in, so whether she does the 25% now or later is immaterial, just the small chance of budget changes, may as well do it now.

I calculate her taxable income next year (most income from long term s&s isas) as being around £500 below personal allowance, so the advice to take only around £2500 from the 75% is particularly good food for thought. :T

dunstonh

Thank you for your quick replies. My partner has an old small pension pot of less than 8k she does not need. She wants to cash in, so whether she does the 25% now or later is immaterial, just the small chance of budget changes, may as well do it now.

There is also the other rumour that the whole pot would become tax free on withdrawal and pension tax relief (on contributions) will be abolished.

So, you need to be careful acting on rumours. The budget is not until March. You have enough of a window to act on it before the end of the tax year as long as you get the forms now and have them ready to post.

LXdaddy

talexuser wrote: »

Thank you for your quick replies. My partner has an old small pension pot of less than 8k she does not need. She wants to cash in, so whether she does the 25% now or later is immaterial, just the small chance of budget changes, may as well do it now.

I calculate her taxable income next year (most income from long term s&s isas) as being around £500 below personal allowance, so the advice to take only around £2500 from the 75% is particularly good food for thought. :T

Is your partner at least 55 years old?

talexuser

Yes, already drawing state pension.

cjking

I don't think the pension lump sum will be taken away from people who were entitled to expect it when they made contributions. It could be disallowed in respect of new contributions. (Not sure about the mechanism.)

C_Mababejive

The tories and indeed others including the misguided and ignorant media continue to chant this rubbish usually including one or all of the following..

middle class
gold plated
final salary

The truth is that there are plenty of ordinary working men and women who have been paying into FS schemes all their lives and if they had the luxury of retiring at 55, might only draw an annual pension of 15 to 20k. Its hardly a kings ransom isnt it? I wonder how George osbourne would survive on 15-20k pa? but no he and others perpetuate the myth that it is only the so called middle classes living in ruralshire and having holidays in Tuscany who apparently luxuriate with a FS pension.

There are people on benefits who have never done a days work in their lives who gross more than 15-20k pa.

Deneb

https://www.towerswatson.com/en-GB/Insights/IC-Types/Ad-hoc-Point-of-View/Commentary-on-Pensions-Tax-Changes

mgdavid

C_Mababejive wrote: »

.......

There are people on benefits who have never done a days work in their lives who gross more than 15-20k pa.

which doesn't make pensions bad, just perhaps provides ammunition for reform of the benefits system