Pension Pot - Lump sum

Gassa144

I have a part time job earning £16,000 a year. I have a pension pot with 2 providers totaling £125,000 due out when i'm 60 in late May 2019.
I want to take all of it out in a lump sum to pay off CC's totaling £21,000, a bank loan totaling £6,000 and carry out work on the house.
My questions are: what will I pay in tax taking out the lump sum? and Why would one provider ask me if I want to take it out before the new tax year in April 2019-20 and what is the benefit of this?

Mnd

You are a basic rate tax payer already, so anything above the tfls will be taxed, and a lot will be at the higher rate. This will cost thousands of pounds

GunJack

Approx. £31500 tax-free, £30k @20% tax, £63500@40% tax, so it would cost you IRO £31500 in tax as a very rough guide...

Gassa144

Thanks for replies but:
My second question is: Why would one provider ask me if I want to take it out before the new tax year in April 2019-20 and what is the benefit of this?

McKneff

What are you going to live on when you retire.
State pension will never be enough and you wont be able to claim any extras if you have cashed in a pension.
I would get a state pension forecast before you do anything

Gassa144

My wife has a large pension and we have a large house with no mortgage which we can downsize and live off proceeds.

Dazed_and_confused

The tax will depend on which country you are resident in for tax purposes in the year you take the taxable element of the pension.

If you will be Scottish resident there will be more tax payable.

Only the provider knows why they asked that question but it may simple be around timescales for setting up it - is 2018:19 still an option?

Remember if you take it over two tax years and you have broadly the same £16k normal income in each year the tax is likely to be less overall as you will have plenty of basic rate tax band available in each year rather than just using one years worth.

But as others have said taking the whole lot all in one go (or two either side of the new tax year) is not something to be done lightly.