Use savings before drawing down

booveedoo

Hi. I was made redundant last month and given a good redundancy payment. Question is should I use my redundancy money to live of or drawdown my max pension without incurring tax and top up with redundancy money.
I have 2 pension pots. One of the pots I've already taken my TF cash at 25%, the other pot I haven't. 
I know I haven't put any figures on these pots and my redundancy, just throwing it out there for best options. Thanks

MX5huggy

The best option is to put as much money into your pension as you can this tax year, exactly how much that is can be a bit complicated question. But any money you roll through a pension as a 20% tax payer gets a 6.25% up lift. 

booveedoo

MX5huggy said:

The best option is to put as much money into your pension as you can this tax year, exactly how much that is can be a bit complicated question. But any money you roll through a pension as a 20% tax payer gets a 6.25% up lift. 

Yes. I already put 30k of my redundancy into my pot I've yet to take 25% from.

Nebulous2

There is a lot of information other than the figures that is missing. 

How old are you? Do you intend / expect to work again? 

If you take any taxable money from a DC pension you will be limited in any money you can pay into a pension in future. 

If the pot you haven't touched is sufficiently large and is one you want /need to live on, then taking the full 25% up front may not be the best way to drawdown. 

MK62

booveedoo said:

Hi. I was made redundant last month and given a good redundancy payment. Question is should I use my redundancy money to live of or drawdown my max pension without incurring tax and top up with redundancy money.

Generally speaking, the second option.......but it depends on your particular circumstances.

NannaH

If you don’t want to trigger the MPAA then living on savings is the only option,  you could also take the other 25% tfls of course. 

Plus money in a pension is ‘safe’ should you ever need state benefits (up to SP age anyway),  so first stop should always be to use savings first. 

Scrounger

NannaH said:

If you don’t want to trigger the MPAA then living on savings is the only option,  you could also take the other 25% tfls of course. 

'Small pots' is another option - eg by arranging some partial transfers (of < £10k).

Scrounger

booveedoo

Nebulous2 said:

There is a lot of information other than the figures that is missing. 

How old are you? Do you intend / expect to work again? 

If you take any taxable money from a DC pension you will be limited in any money you can pay into a pension in future. 

If the pot you haven't touched is sufficiently large and is one you want /need to live on, then taking the full 25% up front may not be the best way to drawdown. 

I`m 56 and currently not expecting to work again, therefore not expecting to pay any money into my pension and hence triggering the MPAA.
So in this case, I guess using drawdown (to max tax free allowance) and topping up with redundancy money would be the best option.

booveedoo

Scrounger said:

NannaH said:

If you don’t want to trigger the MPAA then living on savings is the only option,  you could also take the other 25% tfls of course. 

'Small pots' is another option - eg by arranging some partial transfers (of < £10k).

Scrounger

Thanks, but pension pot is a lot greater than 10k. Would have been a good option, or is there a "workaround"?

sheslookinhot

Or using redundancy money and topping up with drawdown. 

MK62

booveedoo said:

I`m 56 and currently not expecting to work again, therefore not expecting to pay any money into my pension and hence triggering the MPAA.
So in this case, I guess using drawdown (to max tax free allowance) and topping up with redundancy money would be the best option.

From what you've said, then yes, that's probably the best option, assuming the figures add up.....

How best to do that would depend on the schemes in question......some charge for drawdown/uflps, some don't, some charge less for ufpls payments (only an option on your uncrystallised pension though).

Remember too, that you aren't usually stuck with what your current schemes offer.......transferring isn't usually too difficult (though if going down that route, I'd do it one pension at a time to maintain constant withdrawal access)