Looking for options to help withdraw from pension's without deductions?

Duffy1807_2

Hi Guys, 
Hope you all are doing well,

I have few questions i would like to ask for help with regarding my mothers pension. Let me try and set out a background profile first.
My mother works part time and has a Tax allowance of 1263L allowing for £12600 income to be tax free. She is also married and has not applied for marriage allowance (in case this may be worth doing). She  currently earns £750 a month , £9000 a year which leaves £3600 available for her tax free allowance.

She has 2 pensions which is held by 2 different companies,

a) Royal London - £29000
b) Now Pension - £1900

Just to note she is also due to recieve State Penson next year in November 2023 at £185 a week approximetly £800 a month.( if this is not deffered)
She is also looking cutting down her working hours,so in the future her £9000, will most likely drop.

My Questions relate to trying to find out what could be the best way to release both pensions?

We have viewed , annuity , lump sum , fixed and flex withdrawels and transfers, and to be honest i think I understand the way these work as a precaution  I would like a second opinion..

We have ruled out :-  Royal London 

Lump Sum as the tax  deductions are insanly high, We were informed my mum would recieve £21,000 from her £29,000 if we did this.
annueity - we recieved a couple of quotes, that would release, 25% tax free and approximetly £1400 a year for the rest of her life. however my mum prefers the cash ....
Fixed - as we dont now what my mums income will be in the future and this could mean she pays tax if earning too much.
Transfers - We dont beleive their would be any better companies to transfer the pension pot too.

Flex - We beleive the right way to go about this is drawdown, so we can request ammounts at any time.  ( But they transfer the pot and am not sure exactly how this will effect the remaining balance of the pot)

Regarding - Now pension

We beleive a Lump Sum is best  as it a small pot that will not put her over the tax allowance?  Trying actiion this plan, her estimated yearly income for this tax year will be £9000,

This year alone we have £3600 tax allowance free, 
Would we be best , Withdrawing Lump sum of Now Pension £1900 that would leave £1700 of her tax free personal allowance and also withdrawing the 25%  Tax free  which does not contribute to her personal allowance from her royal london plus an additional £1700 as allowed from her tax free allowance?  if that makes sence.

Ami correct in saying that would work?

also for next tax year, is it possible to Defer her state pension, and withdraw from Royal London X ammount i.e £3600 , that keeps her income below the 1263L ? would this be tax free? would it effect her state pension ? could we defer her state pension by 18/24 Months, and withdraw from her pension in the meantime and then apply for her state pension?

Should we apply for marriage allowance, would that help.?

I am not sure, please if anybody can assist that would be great. Thank you in advance. sorry fi this is a bit long winded

Brie

How much is mom's OH earning?  It seems likely that this might be a good idea for him (? assuming male) to get the advantage of the tax allowance if only until her earning increase.  

Alternatively it would be sensible to release some of the money from the pensions before the SP kicks in so as to take advantage of the unused tax allowance in this tax year and, maybe, the next and beyond if she defers.  I was advised to do similar as I'm in a low earning period prior to getting my SP having built up a cash reserve that will cover living costs for a couple of years.  

dunstonh

UFPLS doesnt have to be the full amount.  It can be partial and done over multiple tax years/phased.

Dazed_and_C0nfused

Applying for Marriage Allowance will reduce her Personal Allowance to £11,310.

Is that what you were thinking of?

Krakkkers

If she is giving up work when SP kicks in then she could take the lump sums and £3k a year pension plus the SP and not pay any tax?

Albermarle

Lump Sum as the tax  deductions are insanly high, We were informed my mum would recieve £21,000 from her £29,000 if we did this.

If you took £29K as a lump sum , then £7250 would be tax free, leaving £21,750 as taxable.

So she would have £21,750 + £9,000 taxable income. The tax on this would be £6,150. Not sure where the £8K from RL came from.

Anyway it is a bit academic as one lump sum not really the way to go anyway.

molerat

Albermarle said:

Lump Sum as the tax  deductions are insanly high, We were informed my mum would recieve £21,000 from her £29,000 if we did this.

If you took £29K as a lump sum , then £7250 would be tax free, leaving £21,750 as taxable.

So she would have £21,750 + £9,000 taxable income. The tax on this would be £6,150. Not sure where the £8K from RL came from.

Anyway it is a bit academic as one lump sum not really the way to go anyway.

£21750 taxed at 1257LM1 would have £8062.11 tax deducted paying £20937.89 to the client.  They were only stating what tax they would deduct, it is not their place to know someone's personal tax position although the literature will mention how to get anything overpaid refunded.

Albermarle

molerat said:

Albermarle said:

Lump Sum as the tax  deductions are insanly high, We were informed my mum would recieve £21,000 from her £29,000 if we did this.

If you took £29K as a lump sum , then £7250 would be tax free, leaving £21,750 as taxable.

So she would have £21,750 + £9,000 taxable income. The tax on this would be £6,150. Not sure where the £8K from RL came from.

Anyway it is a bit academic as one lump sum not really the way to go anyway.

£21750 taxed at 1257LM1 would have £8062.11 tax deducted paying £20937.89 to the client.  They were only stating what tax they would deduct, it is not their place to know someone's personal tax position although the literature will mention how to get anything overpaid refunded.

Fair comment, should have realised that.