55 and considering treating myself:

Nick9967

Hi all

I was convinced i knew the answer to this but now have doubts!
My pot is with SW and I've just turned 55, I'm considering treating us with a relatively small amount of tax free from my pot.

Might seem like a daft question but, I'm struggling to get this right in my own head, 

	£	%
Pot	£200,000
Withdraw Tax Free (now)	£30,000	15.0%
Remainder	£170,000
3 more years untouched with growth	£196,000
Tax Free value still to take???	???????

Also if i did this would I have any restrictions ref what i could continue paying into the same pot , will still be working so would need to if possible

thanks all

GazzaBloom

My understanding is:

To get your £30K tax free you would need to crystallise £120K into drawdown of which you could leave 75% taxable undrawn = £90K in a drawdown account. This amount will be subject to tax whenever you choose to draw it down but could be invested for future potential growth for retirement but all of that would be taxable.

Any remainder in the uncrystallized pre-retirement account (£80K at point of above drawdown) would be able to be drawn of which 25% would tax free every time you take from it, so the actual amount remaining to be drawn tax free could vary depending on how many withdrawals you take vs any growth/losses it achieves over time.

Drawing the £30K tax free sum only does not affect your annual allowance so you can still pay in up to £40K a year from employment contributions. If you take some of the taxable sum I believe this reduces to £4,000 a year.

Nick9967

Thanks 
think i used a bad example - this one shows it differently , same question though 

	£	%
Pot	£200,000
Withdraw Tax Free	£15,000	7.5%
Remainder	£185,000
3 more years untouched (new)	£214,000
Tax Free value???	£35,500	17.75%	Based on original pot
Tax Free value???	£37,985	17.75%	Based on new pot

dunstonh

Also if i did this would I have any restrictions ref what i could continue paying into the same pot , will still be working so would need to if possible

Does your existing pension support income drawdown?  Many legacy plans do not.  So, you may have to transfer the pension if it doesn't.

There are no restrictions if you only access the tax free element.   Only if you access the taxable element.  Obviously, there are consequences to your actions.  Such as paying more tax in retirement than you need to and having a lower amount of money.   Plus, drawing it after a market crash will hurt (unless you pre-prepared by moving it to cash more than a year ago).

wjr4

Have you got any other pensions? 

Linton

You have £200K.  Your tax free allowance is 25%.  You take £30K tax free which makes £90K crystalised, £80K uncrystalised. and £30K in your pocket.

The £26K growth is split in the same proportion so:
 - The £90Kcrystalised increases to £90K+26 X 90/170=£103764.71 to nearest p
 - The£80K uncrstalised increases tp £80 +26 X 80/170=£92235.29 to nearest p

You can now take 25% of the uncrystalised pot tax free=£23058.82 to nearest p

PS you have now changed your data.  You can repeat my calculation putting in your new valuyes.

Nick9967

dunstonh said:

Also if i did this would I have any restrictions ref what i could continue paying into the same pot , will still be working so would need to if possible

Does your existing pension support income drawdown?  Many legacy plans do not.  So, you may have to transfer the pension if it doesn't.

There are no restrictions if you only access the tax free element.   Only if you access the taxable element.  Obviously, there are consequences to your actions.  Such as paying more tax in retirement than you need to and having a lower amount of money.   Plus, drawing it after a market crash will hurt (unless you pre-prepared by moving it to cash more than a year ago).

Thanks get your points, which of my calcs for subsequent tax fee value is correct ?

Linton

To answer the second question:

Any money you pay into the pot is added to the uncrystalised part.
Legally there are no restrictions to adding money to the pot except for those that apply generally.  WHether your pension provider can do what you want is another matter.  Old schemes probably cannot, so you may have to transfer the money elsewhere which could cause some hassle if it is an employer scheme.

Nick9967

wjr4 said:

Have you got any other pensions? 

Yes i have alternative income routes , in real terms that 200k only has to last me 20 years of drawdown at between 12-15k pa some of which will take me over my personal allowance threshold so will be paying tax on part.

Nick9967

Linton said:

To answer the second question:

Any money you pay into the pot is added to the uncrystalised part.
Legally there are no restrictions to adding money to the pot except for those that apply generally.  WHether your pension provider can do what you want is another matter.  Old schemes probably cannot, so you may have to transfer the money elsewhere which could cause some hassle if it is an employer scheme.

thats key for me thanks , so any growth and any newness goes into uncrystalised and attracts 25% tax free no matter what , its my own pot not connect to an employer so in theory can do what i like i think

Marcon

Nick9967 said:

Linton said:

To answer the second question:

Any money you pay into the pot is added to the uncrystalised part.
Legally there are no restrictions to adding money to the pot except for those that apply generally.  WHether your pension provider can do what you want is another matter.  Old schemes probably cannot, so you may have to transfer the money elsewhere which could cause some hassle if it is an employer scheme.

thats key for me thanks , so any growth and any newness goes into uncrystalised and attracts 25% tax free no matter what , its my own pot not connect to an employer so in theory can do what i like i think

No - you can do what the terms of your pension plan permit you to do.