Pension pot

binnie

My husband took early retirement last January age 53 and gets £692 a month from his private works pension. No tax as he doesn't earn enough.
In August this year he is 55 and has a £19,000 pension which was paid by AVC's so we want to try and take the whole lot out as it only gives us a few hundred pounds a year. We want to do house improvements and enjoy some of the money.

I believe there is a 25% tax on the some of it and not sure how much on the rest.

What do they do with the £692 he gets each month as we need that to live on.

Thanks

molerat

25% of the £19K can be taken tax free and the remaining £14.25K will be taxable along with his other pension income. The pension provider will tax it on an M1 basis so the tax paid will be incorrect for the year and will need to be reclaimed. There will be no change to the current amount received but it will be taken into account when calculating the tax due for the year.

fergual2

I would have thought this would happen
£8304 per annum current pension
£4750 is tax free (25% of 19000)


rest of pension pot is 14250 lump sum which will be 20% taxed by provider by default giving you £11,400


10600 is the annual allowance
So I am guessing you can claim back £2296 of the taxed 14250 from HMRC through self assessment as this is deemed unused annual allowance.

kidmugsy

fergual2 wrote: »

I would have thought this would happen £8304 per annum current pension
£4750 is tax free (25% of 19000) ....
rest of pension pot is £14250k

After the tax-free lump sum is taken, to avoid income tax a sensible thing would be to draw (£11000 - £8304)p.a. = £2696 p.a. until the £14250 is all gone. Otherwise the OP will be paying 20% tax on much of it needlessly.

If his AVC provider won't allow this (they may not have suitable software) he could presumably transfer to a provider who will. He'd be wise to check for any penalties for transferring out. (I transferred an AVC of mine to a SIPP without penalties.)

binnie

Thank you for your replies.
Hmmmm, confused.com
Suppose we need to wait to see the paperwork.
We do have some, but don´t understand any of it.
It got transferred to a few people over the course of him working for 37 years .
If we ring they won´t give us advice, so maybe we need a financial advisor but not how much they cost.

binnie

kidmugsy wrote: »

After the tax-free lump sum is taken, to avoid income tax a sensible thing would be to draw (£11000 - £8304)p.a. = £2696 p.a. until the £14250 is all gone. Otherwise the OP will be paying 20% tax on much of it needlessly.

If his AVC provider won't allow this (they may not have suitable software) he could presumably transfer to a provider who will. He'd be wise to check for any penalties for transferring out. (I transferred an AVC of mine to a SIPP without penalties.)

Hi What´s a SIPP please
We are terrible, haven´t got a clue. I met hubby 20 years after he has taken a pension out so I didn´t even know he had this AVC money until last year and neither did he, he had forgot, lol

kidmugsy

A SIPP is a self-invested personal pension. One of these might suit your case well. We use Hargreaves Lansdown, whose service is excellent, and whose prices are reasonable for a smallish pot like yours (and ours).

You don't need to pay an IFA if all you want to do is transfer to a SIPP. Once the money is there you'll need to decide whether to invest it, e.g. in shares, or leave it in cash. If you are going to draw it all out in about 5 years, cash might be OK.

But not using an IFA means that it's up to you to check whether there's a penalty for transferring. The Pru didn't apply a penalty to me.

binnie

Thanks for that. Will need to check who it's with as we got some more paperwork from a company which I can't remember the name as we are away at the moment.