Maximising Tax Relief

Dazed_and_C0nfused

No, a TFLS is exactly what it says on the tin.

It is taxable income (even 1p) that matters.  Buying an annuity is one exception to this I think.

chrisrsmith

Dazed_and_C0nfused said:

No, a TFLS is exactly what it says on the tin.

It is taxable income (even 1p) that matters.  Buying an annuity is one exception to this I think.

So whenever I took my 25% TFLS, my Aegon defined benefits pension was moved into the Retiready scheme. I have not earned any other taxable income this FY.
So just to be crystal clear (and apologies if I am asking a stupid question but it's a stupid person that doesn't have the sense to ask one:)),  if I take anymore from the pension pot this year (an ad hoc withdrawal), it will be considered as Taxable Income even though I won't pay any tax as it will be within my tax free allowance; and as such I will be effected by MPAA and limited to £4K contributions from any potential new employer (if I go back to work).
I also appreciate that my pension provider  would tax at emergency rate and then I would have to claim this back from the tax man.

MallyGirl

Yes - anything further you take from the pension that has already had 25% TFLS out of it is taxable income even if the tax rate applied is 0%.
The exception to the £4K limit is if you got employment with a final salary/defined benefit pension such as the NHS, police, local government, civil service. You can still be part of a DB pension with no £4K constraints if MPAA has been triggered.

Croeso69

MallyGirl said:

Yes - anything further you take from the pension that has already had 25% TFLS out of it is taxable income even if the tax rate applied is 0%.
The exception to the £4K limit is if you got employment with a final salary/defined benefit pension such as the NHS, police, local government, civil service. You can still be part of a DB pension with no £4K constraints if MPAA has been triggered.

A small pot of £10k or less from a DC pension (25% of this is tax free though technically not a PCLS) will not invoke the MPAA and also uses zero LTA. You can take up to three small pots in your lifetime.

Hargreaves Lansdown will create a small pot from a larger SIPP specifically for this purpose. Useful if you are over LTA as this (effectively) gives you an extra LTA allowance of a maximum of £30,000. Better to get an extra £7,500 tax free cash instead of paying £7,500 LTA charge.