The best way to take a lump sum from pension

Langkawilady

Hi, I am 69 (70 in February 2019)and have discovered I have just over £15,000 in an old pension which I didn't know I had. I do not pay tax as I only have my weekly pension of £172.95 a week. Can someone please advise me of the best way to take this out in full. I was told I would have to pay tax on some of it, which I can then claim back. Thanks for your help in advance. Jill

Triumph13

It will take you 4 years to get that out without paying any tax. You can take 25% immediately as a tax free lump sum, but anything beyond that will be taxed as income. Your existing pension is £9k leaving you with £2,850 a year that you could take out without paying tax.
Another alternative would be to defer your state pension for a year over the 19/20 tax year. You could then take all the pension out tax free and live on it over that year, giving you an increased state pension when you restart in the 20/21 tax year.

squirrelpie

I was told I would have to pay tax on some of it, which I can then claim back.

This probably refers to the first taxable payment you take from the pension, because of the way the tax system works. When you take the first payment, the pension provider doesn't have a tax code for you, so they have to use an 'emergency month 1' code and that results in you paying too much. You then have to fill in a form or phone the taxman to claim it back, unless you're willing to wait a very long time. After you make the first taxable withdrawal, the taxman will send a code to your pension provider so subsequent payments are taxed correctly.



There's more detail at https://adviser.royallondon.com/technical-central/pensions/benefit-options/emergency-tax-and-lump-sum-withdrawals/


I agree with what Triumph13 said.

xylophone

https://www.litrg.org.uk/tax-guides/pensioners-and-tax/what-state-pension-deferral

may be worth a read.