Tax liability

markjag22

On the pensionwise website it states that an initial amount can be taken with 25% tax free and that subsequent amounts that are withdrawn are also 25% tax free. Is this correct? If so does anybody know of a pension company that operates a pension in this way?

Sibbers123

No it doesn't work this way.

There are two options;

1 - you tax 25% of the whole fund all of which is tax free, or
2 - 25% of each withdrawal can be treated as tax free.

Never both.

ermine

markjag22 wrote: »

that an initial amount can be taken with 25% tax free and that subsequent amounts that are withdrawn are also 25% tax free. Is this correct?

No. Of any given saved sum from which you have not drawn down, you can either take 25% of the sum as a tax free lump sum, with all the rest taxable (though if the total income in any year is below your personal allowance then that amount is not taxed, in the same way as any other income).


Alternatively you can take you sum as UFPLS, with no initial tax-free lump sum but 25% of what you do take is tax-free and the rest as income, subject to the usual personal allowance etc.


Be warned that as soon as you take one penny more than the 25% tax-free initial lump sum, the amount you can put into a pension is limited to either £3600 or £4000 p.a if you earn more than that in a year



If you put a subsequent sum into your pension having taken a 25% lump sum, then 25% of the subsequent savings can also be taken tax-free.

Paul_Herring

On the pensionwise website it states that...

Got a URL for that particular page? It's either completely wrong, or (more likely) badly worded.

markjag22

MSE System says links are not allowed.

On the take-cash-in-chunks page of the pensionwise website.

It states "Each time you take a chunk of money 25% is tax free and the rest is taxable."

xylophone

https://www.pensionwise.gov.uk/en/pension-pot-options

It explains the ways in which you can access your 25% tax free pension lump sum.

It does not say that you can take 25% of the whole and then continue to take 25% tax free from the balance.

markjag22

As Paul Herring wrote the info is badly worded.
"Each time you take a chunk of money 25% is tax free and the rest is taxable.
Obviously gives the (incorrect) impression that every chunk of money taken is tax free, which is not the case after some research.
As we know government websites/IT leave a lot to be desired.
I guess it was too much to hope something would be tax free.