out of curiosity lump sum

thebullsback

If a retired person 62   whos only income was £8400 from work pension was wanting to use pension freedom to access £28000 lump sum would they have to pay any tax on it due to personal allowance ?

[Deleted User]

Where is the £28000 coming from? Does it form part of a DC pension pot you have?

thebullsback

Not part of a DC .

garmeg

[Deleted User] said:

Where is the £28000 coming from? Does it form part of a DC pension pot you have?

thebullsback said:

Not part of a DC .

Is it PCLS (tax free cash) from a DB pension then?

tacpot12

If they want to use "pension freedoms" then it must be a DC - the pension freedoms only apply to DC pensions.

If they want to access a lump sum from an employer's pension scheme, they can do so if the scheme allows, but if they are ready receiving benefits from the scheme, it would be unusual to be allowed to take any lump sum, except perhaps in the even of being seriously (or possibly terminally) ill. If it is a DB pension that they haven't started to draw yet,  then the Pension Commencement Lump Sum, would be tax free.

garmeg

tacpot12 said:

If they want to use "pension freedoms" then it must be a DC - the pension freedoms only apply to DC pensions.

If they want to access a lump sum from an employer's pension scheme, they can do so if the scheme allows, but if they are ready receiving benefits from the scheme, it would be unusual to be allowed to take any lump sum, except perhaps in the even of being seriously (or possibly terminally) ill. If it is a DB pension that they haven't started to draw yet,  then the Pension Commencement Lump Sum, would be tax free.

I highlighted that (the tax free nature) in brackets. If not DC the original question makes no sense really. I feel we are missing a key bit of information here.

thebullsback

its a miss sold a pension redress I was moved to a section 32 which is to be payable in Feb this year .Letter tells me i have lump sum and can take lumps ,shop around, drawdown ect . 
But lump sum seems attractive if full amount could be gained

thebullsback

Just to say Section 32 is not involved in this lump sum and will be used to provide a pension of £2300pa that I've inc in op

thebullsback

In a nutshell i have been told my section 32 will pay a pension of £2300  pa and because I received a Redress payment which was invested separately I also have a lump sum of £28000 which I can access under pension freedom .
My reckoning says I will be able to take whole amount Tax free.

garmeg

thebullsback said:

In a nutshell i have been told my section 32 will pay a pension of £2300  pa and because I received a Redress payment which was invested separately I also have a lump sum of £28000 which I can access under pension freedom .
My reckoning says I will be able to take whole amount Tax free.

You have a tax free allowance of £12,500. Your pension uses £8,400 of this leaving £3:100.

Of your £28,000 you can take tax free cash (25%) of £7,000.
You can take a further £3,100 out within your personal allowance.
This leaves about £18,000 in your pension.
The rest is taxable at 20% if taken in the same tax year. Alternatively draw down £3,100 per year until state pension age. When state pension kicks in just withdraw whatever is left at 20% tax.

thebullsback

That sounds good I thank you