Tax and my pension pot!

howmuch4

Sorry if this is a bit convoluted but I cannot seem to find any info anywhere.
I have a £250000 pot. If I take the 25% and leave the remainder for a couple more years it might make 200K. Annuities aren worth anything so would I be able to dip into the 200k say at 20k pa and only pay 20% tax per withdrawl. 
Thks all.

xylophone

Sorry if this is a bit convoluted but I cannot seem to find any info anywhere.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise

Start here https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/explore-your-pension-options

Book an appointment to discuss?

dunstonh

If I take the 25% 

Do you need to take the 25% up front?  Too many people take it without realising it may not be the best option.    Nowadays, the majority of at retirement cases I deal do not take the 25% up front but take it on drip with the income.    under annuities it was common sense to take it up front.  But with drawdown it is not unless there is a justification for doing so.

 so would I be able to dip into the 200k say at 20k pa and only pay 20% tax per withdrawl. 

Anything you take from the 75% element is classed as taxable income.  So, your personal allowance and income tax bands will apply to it based on your total income.

howmuch4

dunstonh said:

If I take the 25% 

Do you need to take the 25% up front?  Too many people take it without realising it may not be the best option.    Nowadays, the majority of at retirement cases I deal do not take the 25% up front but take it on drip with the income.    under annuities it was common sense to take it up front.  But with drawdown it is not unless there is a justification for doing so.

 so would I be able to dip into the 200k say at 20k pa and only pay 20% tax per withdrawl. 

Anything you take from the 75% element is classed as taxable income.  So, your personal allowance and income tax bands will apply to it based on your total income.

No I dont and I kinda mentioned it just to test the water, but yes of course it makes more sense to drip release cash keeping the pot as big as possible.

My real issue is now that annuities are practically non existent what do we do with the remaining pot once the 25% threshold has been reached? If we take it all out in one go it'll cost 40%.....Id like to think we can release small amounts therefore paying less tax.

Dazed_and_C0nfused

If you take it out "in one go" (£187,500) you would actually be paying some tax at an effective rate of 60% or possibly even 61.5% so 40% wouldn't seem so bad!

MX5huggy

That’s exactly what you do it’s called drawdown, you can opt for a regular monthly payment or just take when you want. The latter can cause lumpy tax payments because if for example you take £10000 in April it will be initially taxed as if your going to take £10000 every month of the year, either avoid this or it will sort out with HMRC.

dunstonh

My real issue is now that annuities are practically non existent 

I have set several annuities up in the last few months.   They are not non-existent.  However, until interest rates rise, they may not be a viable for many people as they used to be.

 what do we do with the remaining pot once the 25% threshold has been reached? 

There is no 25% threshold if you take it drip.  You would be crystlalising an amount each month where 25% is tax-free and 75% is taxable (but within your personal allowance).  Your remaining fund remains uncrystallised and continues to be invested.   You would introduce a suitable invesment/drawdown strategy but that is pretty much it.

 If we take it all out in one go it'll cost 40%.....Id like to think we can release small amounts therefore paying less tax.

There a multiple wayt to access your pension.   It would probably be worth you investigating all of the different methods as it appears you are only aware of a couple at this stage.  I think once you realise all of the options, you will be much happier with what you can do.
   

howmuch4

dunstonh said:

My real issue is now that annuities are practically non existent 

I have set several annuities up in the last few months.   They are not non-existent.  However, until interest rates rise, they may not be a viable for many people as they used to be.

 what do we do with the remaining pot once the 25% threshold has been reached? 

There is no 25% threshold if you take it drip.  You would be crystlalising an amount each month where 25% is tax-free and 75% is taxable (but within your personal allowance).  Your remaining fund remains uncrystallised and continues to be invested.   You would introduce a suitable invesment/drawdown strategy but that is pretty much it.

 If we take it all out in one go it'll cost 40%.....Id like to think we can release small amounts therefore paying less tax.

There a multiple wayt to access your pension.   It would probably be worth you investigating all of the different methods as it appears you are only aware of a couple at this stage.  I think once you realise all of the options, you will be much happier with what you can do.
   

 Many thanks for the thorough reply, I really appreciate it and yes as you can see I havent quite got all my ducks in aline at the mo so to speak, Im good at saving but not so good at figuring out what to do with it all . In fact Ive just had to let my FA go cause I dont agree with ongoing fees, tho to be fair hes been pretty good overall.

zagfles

Have a chat with Pensionwise as above, it's free and they'll be able to explain the various options for drawdown as well as a FA, although they won't make any recommendations.

sheslookinhot

Theoretically, could the OP draw £16.6k per annum and pay no tax whatsoever ?

Dazed_and_C0nfused

sheslookinhot said:

Theoretically, could the OP draw £16.6k per annum and pay no tax whatsoever ?

Yes, £16,760 if they take 25% TFLS as part of each payment and have no other earnings or pension income.

Or £18,440 if they receive the Marriage Allowance tax deduction.

Or £18,528 if they are Scottish resident for tax purposes and receive the Marriage Allowance tax deduction.