25% of pension withdrawal allowance. What if Multiple Pensions?

Croissant

I understand that as I am 57 I can withdraw 25% of my pension tax free. I have multiple pensions and wanted to know if I could with draw 25% from 2 separate pensions tax free? e.g. 25% from my Legal and General pension tax free and 25%  from my Standrad Life pension pension tax?  Thank you in advance.

NedS

Yes, you can withdraw 25% of each pension tax free. Each pension is treated individually, 25% tax free and the remaining 75% taxed.

Brie

Yes it's 25% tax free from any pension.  But I think it's needs to be part of taking other money out or putting the pensions in to payment.  You can't (as I understand it) simply withdraw a chunk of cash tax free and leave the rest.  Furthermore if you do start taking money out of a pension through drawdown it may severely limit what money you can pay into a pension tax free.

Also - check what limitations or restrictions there might be regarding at what age you can take money.

xylophone

  But I think it's needs to be part of taking other money out or putting the pensions in to payment.

See https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/pension-commencement-lump-sum-tax-free-cash/

No - if these are DC pensions, it is perfectly possible to take just the PCLS from each one and not withdraw the balance.

Note

The total tax-free lump sum paid to an individual from all pension arrangements can’t exceed 25% of the standard lifetime allowance (except where the lump sum is protected).

Indeed, if a person wishes to continue to contribute more than £4000 per annum (gross) to a DC pension after withdrawing the PCLS, he would not choose to access the. taxable portion as by doing so he would have triggered the Money Purchase Annual Allowance.

If the DC pension were an old contract which did not permit flexibility, he would need to transfer to a modern contract before accessing the pension.

With a DB pension, the PCLS may be accessed only at the time that the pension is brought into payment.

See  (regarding possible flexibility with AVC arrangements connected to DB Schemes)

https://www.irwinmitchell.com/news-and-insights/newsletters/pensions-update/pension-flexibility-defined-benefit-schemes

Bimbly

Brie said:

You can't (as I understand it) simply withdraw a chunk of cash tax free and leave the rest.

You can! 

With a normal direct contribution (DC, pot of money), you absolutely can take your 25% tax free and leave the rest - unless the policy has a specific (and unusual) rule preventing this. If it doesn't have the functionality you require, in most cases it's easy to transfer to a a more modern plan.

The 75% remaining may well be shifted into a drawdown account, but you don't have to start drawing down on that 75%. Unless the pension has a specific rule which says you do.

Albermarle

Croissant said:

I understand that as I am 57 I can withdraw 25% of my pension tax free. I have multiple pensions and wanted to know if I could with draw 25% from 2 separate pensions tax free? e.g. 25% from my Legal and General pension tax free and 25%  from my Standrad Life pension pension tax?  Thank you in advance.

As already said yes you can .
Alternatively you can consolidate one or more of the pensions into one, and take 25% out from that .
It is easier to consolidate pensions quickly on line ,before taking the tax free cash.
It is still possible afterwards but usually needs some more interaction with the provider .

Brie

@Bimbly, @xylophone, @Albermarle
Thanks!  Happy to have been proved wrong and learned a bit more today!!!

p00hsticks

Brie said:

@Bimbly, @xylophone, @Albermarle
Thanks!  Happy to have been proved wrong and learned a bit more today!!!

You were probably getting confused with Defined Benefit pensions, which can sometimes come with a tax free ' Pension commencement Lump Sum' (PCLS).

In those cases, I don't believe you can get the lump sum without also starting to draw the pension.

Croissant

Thank you to everyone who kindly contributed. I really appreciate it.