Taking money out of pension at 55

jamesd

Cus said:

Doesn't taking the 25% tax free mean you have to crystallise the other part and so mean that you can't then put more than £4k in?

Brie said:

Cus said:

Doesn't taking the 25% tax free mean you have to crystallise the other part and so mean that you can't then put more than £4k in?

That's exactly what I have been told which would put a serious dent in my future contributions.

What you've been told is wrong. You can take 25% tax free from any portion of any personal pension (not final or average salary defined benefit types) and it has no effect at all on your future contribution limits. Yes, it's crystallised but it's not crystallising that triggers the money purchase annual allowance.

So if a pot is worth 100k you can take 25% tax free from 40k of it and still be able to take 25% from the 60k and any growth of that later. This gets you 10k now and the 30k is placed into a flexi-access drawdown account where you can touch it once the money purchase annual allowance restriction to 4k in contributions no longer matters to you.

Cus said:

So taking less than 25% tax free but multiple times also ok?
And is MPAA triggered if you want to crystallise the amount over the LTA (if you even can do that?) and take that out at 25% income tax, but leave the full LTA uncrystallised?

Yes, but not from the sample portion of a pot, from different portions like the 40k:60k split example. Once you've taken the tax free cash from a portion - the 40k - you can't again take tax free cash from the remaining 30k of that portion. But you can from the untouched 60k.

Some pension firms choose not to offer flexi-access drawdown and if yours doesn't you can transfer to one that does.

The UFPLS option of a 25% tax free and 75% taxed lump sum always triggers the money purchase annual allowance immediately.

Alternatively, it's possible to use the small pot rule to take the whole of a pension pot worth up to 10k under the small pot rule as a 25% tax free and 75% taxable lump sum. You can do this three times per human lifetime. You can transfer to create pots of convenient size and Hargreaves Lansdown and perhaps others will do this for you automatically behind the scenes if you ask them for a small pot payment of 10k.

The MPAA isn't triggered if you crystallise amounts above the lifetime allowance. You're not entitled to any tax free lump sum above that so you can use the "up to 25% tax free lump sum" and take 0% on the amounts above, still crystallising. Expect to be asked why if you take anything other than 25% because it's highly likely to be a mistake.

You can only crystallise amounts above the lifetime allowance when you've already crystallised enough to use the full lifetime allowance.