Take pension at 55

mickelaine

Hi, newbie here on this site but hope someone can give me a bit of advice. I am thinking of cashing in an old DC with a value of £40,000. I have two other pensions of £40,000 and £90,000 but both are DB so don't want to touch these. If i cash in the DC pension will i just get £10,000 tax free and if so how much tax would I have to pay on the remaining £30,000. My Annual salary is £32,000. Thanks in advance.

xylophone

Do you intend to continue to contribute to a DC pension after having accessed the old DC pension (PCLS and remainder)?
If so, you will need to consider the MPAA. https://www.moneyadviceservice.org.uk/en/articles/tax-relief-on-pension-contributions#:~:text=The%20Money%20Purchase%20Annual%20Allowance%20(MPAA),the%20MPAA%20is%20%C2%A34%2C000.
The £30000 remainder will be taxed as income in the tax year of receipt.
And see https://adviser.royallondon.com/technical-central/pensions/benefit-options/emergency-tax-and-lump-sum-withdrawals/

ffacoffipawb

mickelaine said:

Hi, newbie here on this site but hope someone can give me a bit of advice. I am thinking of cashing in an old DC with a value of £40,000. I have two other pensions of £40,000 and £90,000 but both are DB so don't want to touch these. If i cash in the DC pension will i just get £10,000 tax free and if so how much tax would I have to pay on the remaining £30,000. My Annual salary is £32,000. Thanks in advance.

Assuming you live in Wales or England with a £12,500 personal allowance.

Tax Free £10,000
Basic Tax £18,000 x 0.2 = £3,600
Higher Tax £12,000 x 0.4 = £4,800

Total tax about £8,400 though more may be deducted initially and will need to be reclaimed, probably via tax return after the end of the tax year.

The impact of tax free interest reducing from £1,000 to £500 for a higher rate taxpayer and other repercussions (eg loss of child benefit) ignored.

Brynsam

mickelaine said:

Hi, newbie here on this site but hope someone can give me a bit of advice. I am thinking of cashing in an old DC with a value of £40,000. I have two other pensions of £40,000 and £90,000 but both are DB so don't want to touch these. If i cash in the DC pension will i just get £10,000 tax free and if so how much tax would I have to pay on the remaining £30,000. My Annual salary is £32,000. Thanks in advance.

Cash in over two (tax) years to avoid getting yourself into the higher rate tax bracket.

Albermarle

I have two other pensions of £40,000 and £90,000 but both are DB so don't want to touch these. I

DB pensions do not have a pot value as such like a DC pension. You have a guarantee of an income when you retire .

The pension may offer you a transfer value to try and buy you out of the scheme but that is a different matter