Advice on accessing pension cash

kilfinan

Hi,

I have just over £200k in a RL Governed pension that I intend to use when I reach 55 in a few months. I dont need the cahs to provide a penson as I have other arrangments.

My question is how I would access the cash while minimising tax. I am a higher rate payer and am loathed to give HM Gov any more than I need to.

I also understand that 25% is tax free. Can I take the whole 25% at once ie £50k or in smaller amounts as required? For example, can I take the £50k tax free element in, say 10 withdrawals over a few years, all tax free leaving the other 75% sitting in the pot, hopefully growing due to investment growth.

Hope this makes sense.

Thanks

lisyloo

Personally I’d take the 25% in one lump sum just in case HM Gov changes their mind. Most people would say that’s unlikely especially if your 55 already.
Yes you can take it smaller chunks but I don’t think there’s any tax advantage.

Anything else would be taxed at higher rate so you’d be better off leaving it in.
Do you expect to be a basic rate taxpayer in future?
It’s not clear if your other arrangements are from working and hence will cease at some point or from other non earned income.

Basically the rest is taxed as income so you’re better off taking it when you are on a lower tax rate if that is possible in future.

kilfinan

Thanks for the quick response. I have other pensions that I will use to fund retirement.

I was thinking that I could the 'tax free' element in stages but got concerned that what it actually means is the first 25% of every withdrawal rather than the £50k tax free, then every withdrawal after that is taxed.

I don't expect to be a lower rate payer before retirement, but who knows!

Thanks agin.

dunstonh

My question is how I would access the cash while minimising tax. I am a higher rate payer and am loathed to give HM Gov any more than I need to.

If you dont need the cash to provide a pension and have other arrangements, have you considered adding to the pension. Especially if your objective to pay as little tax as possible.

Can I take the whole 25% at once ie £50k or in smaller amounts as required?

either.

MallyGirl

kilfinan wrote: »

Thanks for the quick response. I have other pensions that I will use to fund retirement.

I was thinking that I could the 'tax free' element in stages but got concerned that what it actually means is the first 25% of every withdrawal rather than the £50k tax free, then every withdrawal after that is taxed.

you can either take the 25% of the full balance tax free as a one off, or take an amount up to that amount and the remainder at a later time, or you can make withdrawals where 25% of each one is tax free. Note that taking any of the taxable 75% will trigger the MPAA which will limit further contributions to DC pensions (not DB) to £4k per year

Albermarle

To add to above post :
When you just take the tax free cash ( either all at once or in stages ) and the rest is left for later ( taxable) withdrawal, it is referred to as drawdown of the pension.
When you take a withdrawal that is 25% tax free cash and 75% taxable it is known as a UFPLS payment .
You can do it either way but ideally you need to decide in advance the preferred way Then you need to check whether your current pension supports what you want to do. A lot of older pensions do not have these facilities and you will have to look at transferring to a more modern pension first.

xylophone

am loathed to give HM Gov any more than I need to.

Take comfort - HMG bods won't loathe you if you pay more than you need- on the contrary, they'll love you to bits....:)

xylophone

Are you continuing in employment after you commence taking benefits from the RL pension?

Will you be continuing to contribute to an occupational pension?

If so, is this pension DC or DB?

kilfinan

I will be continuing to work after taking the cash and am currently paying into a local government scheme.

Thanks for everyones help with this.

xylophone

am currently paying into a local government scheme.

LGPS is a DB Scheme -the MPAA does not apply to contributions to a DB pension.


https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/Money-purchase-annual-allowance/

Had you considered taking the PCLS and contributing the full £20,000 each for you and your spouse to an ISA for 2019/20?

You might regard the remaining £10,000 (plus any taxable amount taken from the RL pension) as an income replacement enabling you to increase your contributions from your LG salary to your pension/AVC?


See

https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/recycling-of-tax-free-cash/

https://adviser.royallondon.com/technical-central/pensions/benefit-options/ufpls-explained/

https://www.royallondon.com/retirement-options/flexible-access/

https://www.moneymarketing.co.uk/ufpls-vs-drawdown/

Does your particular RL pension allow full flexibility or will you have to transfer to another provider?

SeniorSam

If that pension were a SIPP, you could take your 25% and leave the remainder until needed. However, if you don't really need to take it, ( which moves if from the protection of a Trust ) and into your estate, could that have any effect on the taxation of your assets should you die suddenly? If left in the Trust it would be tax free to your nominated beneficiary (possibly your spouse) who could take the whole amount tax free of use it to draw down an income. It sounds like you may need wider guidance on your pensions, so do seek help before making a move that may not be wise.