Lump sum pension

Thecar

Please could someone help
I have £26000 in a pension fund
I'm interested in taking all of the money please can someone tell me what I would get in total in cash from this pot at the moment I get £16000 per year work I'm part time I also get £7000 from my company pension so my income is around £23000 I'm 61 years of age 

Albermarle

If the £26K is in a standard DC pension , then you can have 25% tax free and 75% would be taxable at your normal tax rate of 20% 
So you would get £6500 tax free + ( £19500 minus 20% ) = £22,100 . Initially you will probably pay too much tax and have to claim the excess back .
However if it is an old pension there might be some restriction on how you can take it, so you will need to give them a call 

Thecar

Many Tks I'll be happy with the £22;100 

jamesd

You can get £25,000 if you don't need it until next May, an extra £2,900.

Each tax ear you're allowed to pay up to your pay in gross pension contributions, provided you haven't used UFPLS to take a lump sum and haven't taken taxable money from a drawdown account, which cause a lower limit of £4,000 for each year after you do it..

You can take money using the "small pot rule" without triggering the reduction to 4k up to 3 times in your life. You have to take all of the pot and it can be worth up to 10k. You're allowed to transfer to make a small enough pot. This money is 25% tax free and 75% with basic rate tax deducted, no reclaim needed.

So you could first take £20,000 using the small pot rule twice to get £17,000 after tax. Then you can pay £8,000 net (£10,000 gross after tax relief) into one pension pot and £4,800 (£6,000 gross) into another to use the £16,000 you're allowed this tax year. You'll have £4,200 left over.

Then you can use the small pot rule the final time to take out the £10,000 pot and next tax year (!) contribute £12,800 net (£16,000 gross after tax relief) to a pension, leaves £1,400 of the £4,200. Then you can use UFPLS to withdraw:

1. that £16,000 (£13,600 after tax)
2. the £6,000 gross pot (£5,100 after tax)
3. the £6,000 left in the original £26,000 pot (£5,100 after ta)

That takes you to £1,400 + £13,600 + £5,100 + £5,100 = £25,200 after tax instead of £22,100.

Tax check. Year 1 taxable £23,000 + 0.75*3*£10,000 = £45,500 taxable, still within basic rate band. Year 2 taxable £23,000 + 0.75*(£16,000 + £6,000 + £6,000) = £51,000 which is £1,000 over the basic rate band so you'll need to delay taking out £1,000 until year 3 or pay £200 in higher rate tax.

You're probably in a pension at work. Unless it's using salary sacrifice you'll need to subtract your contributions from the £16,000 pay allowed in gross contributions.

Quite a few steps but at £2,900 or £3,100 extra you're being well paid for them.