Pausing drawdown ?

ossie48

I have a small pension pot with Royal London. I've been drawing it down at £800 a month. Prior to going on holiday a few weeks back its value was £95k now its £88k due to recent events.

Would it make sense to stop withdrawing for the time being ? We can otherwise cope as were basically using it for the finer things in life . The idea was to use the pot up before a couple more pensions kick in in 5 years time, or the longer the better. 

Any thoughts ? 

MX5huggy

How much tax are you paying on it? If your drawing down to use up your tax allowance then keep going but reinvest in an ISA or GIA. 

ossie48

MX5huggy said:

How much tax are you paying on it? If your drawing down to use up your tax allowance then keep going but reinvest in an ISA or GIA. 

I've literally just used up my 25% so Nov will be the start of tax on it.  

TadleyBaggie

ossie48 said:

MX5huggy said:

How much tax are you paying on it? If your drawing down to use up your tax allowance then keep going but reinvest in an ISA or GIA. 

I've literally just used up my 25% so Nov will be the start of tax on it.  

That's not how the tax system works. Tax is worked out on a per period basis, i.e. every month. It isn't possible to opt to pay no tax until you reach your allowance amount.

phillw

TadleyBaggie said:

ossie48 said:

MX5huggy said:

How much tax are you paying on it? If your drawing down to use up your tax allowance then keep going but reinvest in an ISA or GIA. 

I've literally just used up my 25% so Nov will be the start of tax on it.  

That's not how the tax system works. Tax is worked out on a per period basis, i.e. every month. It isn't possible to opt to pay no tax until you reach your allowance amount.

You can
 
https://www.direct.aviva.co.uk/MyTools/PensionWithdrawalTaxCalculator

• All of my tax-free cash first
• 25% of each withdrawal as tax-free cash
• Specify my tax-free cash amount

When you draw out taxable cash, then any tax over your personal allowance gets spread out through the year even before you've reached your personal allowance.

If someone is drawing out all their tax free cash first, then I can only assume they are earning enough from other sources that they used up their personal allowance. If you have £100 left of personal allowance, you would drawdown £100 as taxable.

ossie48

TadleyBaggie said:

ossie48 said:

MX5huggy said:

How much tax are you paying on it? If your drawing down to use up your tax allowance then keep going but reinvest in an ISA or GIA. 

I've literally just used up my 25% so Nov will be the start of tax on it.  

That's not how the tax system works. Tax is worked out on a per period basis, i.e. every month. It isn't possible to opt to pay no tax until you reach your allowance amount.

They told me my non taxable amount would be used up by October and would contact me when I'm due to start paying...now I'm confused. I'm certainly not paying tax on it at the moment. 

Dazed_and_C0nfused

ossie48 said:

TadleyBaggie said:

ossie48 said:

MX5huggy said:

How much tax are you paying on it? If your drawing down to use up your tax allowance then keep going but reinvest in an ISA or GIA. 

I've literally just used up my 25% so Nov will be the start of tax on it.  

That's not how the tax system works. Tax is worked out on a per period basis, i.e. every month. It isn't possible to opt to pay no tax until you reach your allowance amount.

They told me my non taxable amount would be used up by October and would contact me when I'm due to start paying...now I'm confused. I'm certainly not paying tax on it at the moment. 

Maybe you could clarify.

Are you referring to the 25% TFLS or taxable income which isn't being taxed because of your Personal Allowance?

TadleyBaggie

What is the tax code for your drawdown, if it is the full yearly allowance then £800 a month would not see at tax payable for the whole year. You would need to be drawing in excess of £1000 before tax would be liable.

ossie48

Dazed_and_C0nfused said:

ossie48 said:

TadleyBaggie said:

ossie48 said:

MX5huggy said:

How much tax are you paying on it? If your drawing down to use up your tax allowance then keep going but reinvest in an ISA or GIA. 

I've literally just used up my 25% so Nov will be the start of tax on it.  

That's not how the tax system works. Tax is worked out on a per period basis, i.e. every month. It isn't possible to opt to pay no tax until you reach your allowance amount.

They told me my non taxable amount would be used up by October and would contact me when I'm due to start paying...now I'm confused. I'm certainly not paying tax on it at the moment. 

Maybe you could clarify.

Are you referring to the 25% TFLS or taxable income which isn't being taxed because of your Personal Allowance?

The 25% TFLS. 

phillw

Dazed_and_C0nfused said:
Are you referring to the 25% TFLS or taxable income which isn't being taxed because of your Personal Allowance?

He already stated....

I've literally just used up my 25%

TadleyBaggie said:

What is the tax code for your drawdown, if it is the full yearly allowance then £800 a month would not see at tax payable for the whole year. You would need to be drawing in excess of £1000 before tax would be liable.

Unless he has other income, which as he is considering not taking the £800 then I would guess he does have.

ossie48

Just to confirm. This was a small DB pension transferred at age 55 to Royal London.  I initially took out 20% as a lump sum two years ago. I instigated drawdown at £800 a month last Jan. They said they'd contact me when I used up the 25% and mentioned October - or did I hear that wrong.  

My other income is a £40k per annum DB pension, £15k of which doesn't form part of the taxable bit.

I guess I should ring them, either way I'll probably put it on hold unless anyone thinks otherwise.