CASHING IN SMALL PRIVATE PENSION

24Tweezers

I'm a 58 year old married female.  I don't work due to ill-health. 
I'm in receipt of PIP.  (My husband is 62, in work).   We have savings, our mortgage paid off and neither of us have other debts.
I am in  need of two operations, but do not meet my local Health Trusts strict criteria for the NHS to do them. 
I have a small private pension plan which today I rang to find out it's value and as close of business yesterday it was worth an overall figure of a little over £21,000. 
(It would maybe  'give' me around £35/month by the time I officially retire, if it were to perform as it is now, but this is not guaranteed). 
I took this pension out in the late 1980's, but life changes happened back then and I stopped paying into the plan over thirty years ago.
I have no taxable income and am thinking I could go private for the op's,  using whatever this old pension is worth now plus some savings.  The op's will together cost in the region of £30K.
If I understand correctly, the first 25%, in this case circa. £5262, drawn from the pension would be fully tax free and 'disregarded for tax purposes'.  
My PIP is not a taxed benefit, so I'd still have the full tax-free allowance of £12,570 available for use during the current tax year.
Am I correct in thinking the remaining amount of around £3200 would be the actual figure that would be subject to tax?
I realise cashing the pension in would mean 75% of it being taxed now and I'd need to claim back any overpayment afterwards, but could someone please confirm that I am right in my understanding of the the tax side of it.
Many thanks.

Marcon

24Tweezers said:

I'm a 58 year old married female.  I don't work due to ill-health. 
I'm in receipt of PIP.  (My husband is 62, in work).   We have savings, our mortgage paid off and neither of us have other debts.
I am in  need of two operations, but do not meet my local Health Trusts strict criteria for the NHS to do them. 
I have a small private pension plan which today I rang to find out it's value and as close of business yesterday it was worth an overall figure of a little over £21,000. 
(It would maybe  'give' me around £35/month by the time I officially retire, if it were to perform as it is now, but this is not guaranteed). 
I took this pension out in the late 1980's, but life changes happened back then and I stopped paying into the plan over thirty years ago.
I have no taxable income and am thinking I could go private for the op's,  using whatever this old pension is worth now plus some savings.  The op's will together cost in the region of £30K.
If I understand correctly, the first 25%, in this case circa. £5262, drawn from the pension would be fully tax free and 'disregarded for tax purposes'.  
My PIP is not a taxed benefit, so I'd still have the full tax-free allowance of £12,570 available for use during the current tax year.
Am I correct in thinking the remaining amount of around £3200 would be the actual figure that would be subject to tax?
I realise cashing the pension in would mean 75% of it being taxed now and I'd need to claim back any overpayment afterwards, but could someone please confirm that I am right in my understanding of the the tax side of it.
Many thanks.

If you can split your withdrawals over two tax years, and have no other taxable income, you should be able to take the whole lot tax free. It's unlikely a personal pension contract dating from the 1980s will give you that sort of flexibility (but worth checking with the pension provider), so you may need to transfer to a more modern contract, either with the same provider or another one altogether. There is no legal requirement for you to take financial advice before doing so, although if your current provider only deals via financial advisers you may need to cross that bridge before you can transfer - and obviously don't pick a new provider who insists on an intermediary!

You can avoid being overtaxed in the first place if you make one tiny withdrawal before any 'major' one. This article explains why: https://www.thisismoney.co.uk/money/pensions/article-4451718/How-avoid-40-tax-making-pension-withdrawals.html

24Tweezers

Thank you, Marcon.
The pension plan was with taken out with Equitable Life, but is now with Utmost. 
At one point a few years back, I basically wrote the pension off as worthless as EL had big problems, and so I'm pleasantly surprised it could fund around 2/3rds of bill for the operations I need.

Dazed_and_C0nfused

Have you applied for Marriage Allowance?

If so remember your Personal Allowance is only £11,310 not £12,570.

24Tweezers

Yes.  Good point, I'd forgotten that.

24Tweezers

UPDATE:   I bit the bullet and have cashed it all in.  (Just awaiting the credit to show in my bank account).
. 
I've an appointment with the Consultant on Monday, so hope to get a definite date for having my surgery which will at least be partially funded from this old pension plan.