Cash in Pension Pot ?

Dirty_Dick

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.

AnotherJoe

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

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

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

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

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?

Dirty_Dick

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

Dirty_Dick

Sorry, made a mess of the quoting !

Dirty_Dick

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

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?

Dirty_Dick

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 ?