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Cash in Pension Pot ?

I am asking a question for myself and my wife.

I am 65, and my wife is 62.

We have no mortgage, paid off some years ago.

She has a Private pension (pot) that has been paying out for 5 years, and a further six, and is due to re-invest.

I have an Occupational pension, State pension and she has a small private pension.

She has already drawn down some years ago.

The pot has £77698 Protected Maturity Amount

We really want to cash in the full pot, and withdraw the full amount as benefit, but how much tax would be paid on the pot ?
Can we draw down again ?

We DON’T want an annuity, we want to travel the world, have good holidays before we can’t travel !

Any suggestions welcome.
«13

Comments

  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
    10,000 Posts Fifth Anniversary Name Dropper Photogenic
    Presuming you dont plan to spend it all on day one, why would you plan to take it all out on day one so as you can pay the absolute possible maximum tax???????

    Even if you did plan to spend it all on day one, youd be better off to take out a loan, take out the pension money over 3 or so years and pay the loan interest from the money you werent paying as tax.
  • xylophone
    xylophone Posts: 45,703 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    She has a Private pension (pot) that has been paying out for 5 years, and a further six, and is due to re-invest.


    Could you clarify?
    and she has a small private pension.

    She has already drawn down some years ago.

    The pot has £77698 Protected Maturity Amount

    Does she have one, two or three private pensions?

    Assuming the PMA is part of the pension from which she is already drawing an income and she has already take the 25% Pension Commencement Lump Sum, then if she draws it all at once, it will all be taxed as income in the year of receipt.

    https://www.gov.uk/government/publications/rates-and-allowances-income-tax/income-tax-rates-and-allowances-current-and-past
  • Dirty_Dick
    Dirty_Dick Posts: 38 Forumite
    Tenth Anniversary 10 Posts Combo Breaker
    edited 27 November 2018 at 8:13PM
    She has a pension pot which was invested for 5 years, then the remaining amount was reinvested for 6 years. The "pot that is left, £77K, is coming up for sorting out.

    She has one small pension that is ongoing, and the 5 year one which will end in January.

    And I thought similar to you, that she’ll be hit with a big tax payment !
  • bolwin1
    bolwin1 Posts: 282 Forumite
    Eighth Anniversary 100 Posts Name Dropper
    edited 27 November 2018 at 8:17PM
    Is your wife's pension 'pot' actually a fixed term annuity & shortly due to come to the end of its term ? Ignore this - your post crossed with mine
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Dirty_!!!! wrote: »
    She has one small pension that is ongoing

    Do you mean that she is already drawing this pension? If so how much per year?
    Dirty_!!!! wrote: »
    She has a pension pot which was invested for 5 years, then the remaining amount was reinvested for 6 years. The "pot" that is left, £77K, is coming up for sorting out.

    It would be imbecilic to draw it out in one lump. She'd have to pay 40% income tax on part of it, and 20% on another part. We can't tell you how much will be taxed at which rate because you are being coy about the size of her other pension.

    Does she have any other income?

    For the pension "pot" you're discussing: did she take the whole tax-free lump sum when she started drawing from it?
    Free the dunston one next time too.
  • kidmugsy wrote: »
    Do you mean that she is already drawing this pension? If so how much per year?



    It would be imbecilic to draw it out in one lump. She'd have to pay 40% income tax on part of it, and 20% on another part. We can't tell you how much will be taxed at which rate because you are being coy about the size of her other pension.

    Not being coy, didn't know how much info you need !
    She draws around £2000 pa from her other small pension, she has been drawing about £4100 pa on the one that ends in January/

    Does she have any other income?

    She has NO other income.

    For the pension "pot" you're discussing: did she take the whole tax-free lump sum when she started drawing from it?

    Yes, she took 25% on the drawdown
  • Sorry, made a mess of the quoting !
  • AnotherJoe wrote: »
    Presuming you dont plan to spend it all on day one, why would you plan to take it all out on day one so as you can pay the absolute possible maximum tax???????

    Even if you did plan to spend it all on day one, youd be better off to take out a loan, take out the pension money over 3 or so years and pay the loan interest from the money you werent paying as tax.

    Can you take the money in bits and pieces, and stay below any tax thresholds ?
  • dunstonh
    dunstonh Posts: 120,029 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    The pot has £77698 Protected Maturity Amount
    When are the protected points? Often they step up every 5 years from age 60.
    We really want to cash in the full pot, and withdraw the full amount as benefit, but how much tax would be paid on the pot ?
    Why? That would result in unnecessary tax and lower tax free amounts.
    we want to travel the world, have good holidays before we can’t travel !

    You are going to spend £77k (minus tax) in a year?
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • dunstonh wrote: »
    When are the protected points? Often they step up every 5 years from age 60.


    Why? That would result in unnecessary tax and lower tax free amounts.



    You are going to spend £77k (minus tax) in a year?

    Probably not spending within a year, but can you take it out ,a bit at a time, and keep below the tax thresholds ?
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