TFLS query

BJL55

I have a wee question regarding taking a TFLS allowance in stages.

You have a SIPP with a pot of £100K but you don't need to take the full 25% TFLS so initially you take 15% which leaves you with a pot of £85K.

Over the next year your pot will decrease or increase (hopefully), so say the pot decreases to £80K and you want to take the other 10% TFLS, is it 10% of the £80K or 10% of the original £85K?

AlanP_2

Neither.

15k tax free crystallises 60k of the pension, with the 45k marked as being taxable.

Leaves 40k uncrystallised so a 10k lump sum can be taken.

Ignoring ups and downs along the way.

BJL55

AlanP wrote: »

Neither.

15k tax free crystallises 60k of the pension, with the 45k marked as being taxable.

Leaves 40k uncrystallised so a 10k lump sum can be taken.

Ignoring ups and downs along the way.

I'm aware of a crystallised funds, so you are saying the ups and downs are ignored?

AnotherJoe

The 25% is applied to whatever is in the uncrystallsed when you take it out, If the £40k rose to £60k you could take out £15k tax free, if it dropped to £20k you could take out £5k.

NoMore

No he's saying he's ignored them for his example.

You can take 25% tax free of all (or a portion of) uncrystallised funds, including any growth (or losses) that have happened to the uncrystallised portion.

BJL55

AnotherJoe wrote: »

The 25% is applied to whatever is in the uncrystallsed when you take it out, If the £40k rose to £60k you could take out £15k tax free, if it dropped to £20k you could take out £5k.

Thank you - and NoMore, a straight answer to my question :beer:

zagfles

You have to be careful how you do it. If you have a £100k pot, you could crystallise it all and just take £15k as TFLS. But if you do, you've then lost the right to take any more tax free cash from the pension. It's a once only opportunity.

However, what you can do is phased drawdown, which is what people are referring to above, where you only crystallise part of the pot. So you could crystallise £60k, take 25% of that - ie £15k as TFLS, leaving £40k uncrystallised.

The implication of some posts is that the TFLS determines how much crystallises. It doesn't. It's the other way round. How much you crystallise determines the max TFLS you can take, but you could take less if you wanted to (hard to see why it would be sensible for a DC scheme, but it's often better in a DB scheme).