State Pension + Private Pension Tax Free?

rjmachin

Hi,
My dad turns 66 in a few months and has today received his State Pension letter, which he has completed online and also a letter from his private pension with options.

First, he has been retired for 2 years, with no income apart from maybe £100-200 interest from savings.

After reviewing options for the private pension, he would like to take the small lump sums out in a way to avoid paying tax.

I think this is called UFPLS where you can earn £16,666 per year tax free including the 25%.

Using an example of the current state pension as £9110.40 per year and a safe tax free amount of £16000, I thought he could withdraw £6,889 per year or around £570 per month, adjusting over the years to account for SP increases and PA increases.

However, trying to explain how this works and how the £16,666 comes about is confusing me.  I tried to find a calculator, but when I tried the which pension calculator, i used:
Amount withdrawing: £6889
Drawdown plan: No (taking uncrystallised)
Annual income: £9110 (state pension)

Tax to pay: £355

Am I doing something wrong?
Can you help how to take the max amount each month/year without being taxed (apart from emergency tax at first) and what he needs to ask for?
The pension is with Royal London.
Total value is £36k

Thanks

Dox

Work in round figures to keep the sums a bit neater. State pension £9,110; personal allowance £12,500. That means he can have another 'taxable' £3,390 a year from his private pension without actually paying tax. Allowing for 25% of his annual private pension withdrawals to be tax free, that £3,390 becomes £4,520 (divide £3,390 by 3 then multiply by 4).

Going forwards, just adjust the figures as necessary, following the above.

NottinghamKnight

The £16666 figure comes from the personal allowance with a 20% increase to allow for the tax free lump sum (25% of withdrawal). This only works with no other income so to remain tax free given the state pension income then this sum needs to be deducted. So the sums you've done above would leave circa £3,500 to be withdrawn from the pension to add to the state pension to pay no tax, and an additional 25% of the gross amount withdrawn can be taken tax free, so £1150 ish.

rjmachin

Thanks.
That is a lot clearer now

Dazed_and_C0nfused

The current tax year, being the tax year his State Pension starts, will be different.

Let's say his actual State Pension this tax year is approximately £1,500.

That means he could take £11,000 in taxable income from his pension (£14,666 total drawdown using UFPLS) and pay no tax on his pension income.

His savings interest would then be taxed at the savings starter rate of tax, which is 0% in the current tax year.

The above assumes he hasn't applied for Marriage Allowance.

The emergency tax code would mean tax is only deducted if he takes more than £1,042 taxable income as his first payment.