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Tax tax free lump sump GAR pension?

will111222
Posts: 30 Forumite


Hi,
I have a pension pot worth £66,071 with a GAR of 8.17%. I am going to be 20% tax payer in retirement so I think this will give me £5398 before tax and £4319 after tax per year.
I have an option to take 25% tax free which would give me a lump sum of £16,519 and the 75% left in the pot would give me £4049 or £3238 after tax. That is £1081 less each year.
So I think it would take 15 years for the extra £1081 to catch up with the tax free lump sum.
I am thinking of not taking the tax free lump sum. I don't really have any other guaranteed income so it would be nice to some money on top of the state pension for the rest of my life. Am I thinking about this in the right way?
I am not sure if it makes any difference but I am 59 and have reasonably large DC pension pots.
Will
I have a pension pot worth £66,071 with a GAR of 8.17%. I am going to be 20% tax payer in retirement so I think this will give me £5398 before tax and £4319 after tax per year.
I have an option to take 25% tax free which would give me a lump sum of £16,519 and the 75% left in the pot would give me £4049 or £3238 after tax. That is £1081 less each year.
So I think it would take 15 years for the extra £1081 to catch up with the tax free lump sum.
I am thinking of not taking the tax free lump sum. I don't really have any other guaranteed income so it would be nice to some money on top of the state pension for the rest of my life. Am I thinking about this in the right way?
I am not sure if it makes any difference but I am 59 and have reasonably large DC pension pots.
Will
0
Comments
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will111222 wrote: »Hi,
I have a pension pot worth £66,071 with a GAR of 8.17%. I am going to be 20% tax payer in retirement so I think this will give me £5398 before tax and £4319 after tax per year.
I have an option to take 25% tax free which would give me a lump sum of £16,519 and the 75% left in the pot would give me £4049 or £3238 after tax. That is £1081 less each year.
So I think it would take 15 years for the extra £1081 to catch up with the tax free lump sum.
I am thinking of not taking the tax free lump sum. I don't really have any other guaranteed income so it would be nice to some money on top of the state pension for the rest of my life. Am I thinking about this in the right way?
I am not sure if it makes any difference but I am 59 and have reasonably large DC pension pots.
Will
With a GAR like that I would take the full pension.0 -
ffacoffipawb wrote: »With a GAR like that I would take the full pension.
Even with that low a GAR I would take the full pension. (My GAR is 10.6% and I am taking it in full, despite having other guaranteed income.)0 -
I would be an easy decision for me. The question is, if you took the 25% TFLS, is there anywhere else you could put that money which would give you are return that is guaranteed and better than 8%. In the current climate the answer to that is no.
I would therefore forget the lump sum and take the full pension.0 -
I too have a 10.6% GAR pension due in 2 years time.
I've thought about this long and hard and have decided to take a 15% 'tax free' element rather than the 25%.
I agree with all the posters that say that taking the full pension is appropriate because of the GAR but is also a consideration that the lump sum benefit, whatever the % taken, might be of use to start off your life as a pensioner.
Also the state pension kicks in in a few years which will give me another 8k - 10k a year so I don't want to be a rich 'old' pensioner not having had any fun in my 60's0 -
My dad had this, he took out the annuity just before it got withdrawn (before he turned 60 i think). 10% annuity on 125k pot. 50% to spouse on death as well. No inflation linkage unfortunately but given it seems like we are structurally long term low inflation/rates, its a no brainer to take it out at the high rate. I worry the provider will go bust as they surely can not afford it??0
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