DB pension. Can I take 25% lump sum plus this years personal allowance (no income) all tax free?

Malthusian

Pat38493 said:

As far as I know, you can take the 25% tax free cash out of the DC scheme without triggering the pension contribution limits - it’s only if you take any taxable money out of it that you trigger the limits on future pension contributions.

Drawing taxable income flexibly triggers the Money Purchase Annual Allowance.
Taking the 25% tax free cash doesn't trigger the MPAA. Nor do "non-flexible" methods of taking taxable income like lifetime annuities.

Frances63

Brie said:

Are you intending to work in the future??  (you are collecting JSA after all.....)

If so you may want to be careful about getting anything out of the DC scheme.  I'm still a bit confused by it all but I was told that putting my DC schemes into drawdown (which seemed to be the only option to collect them) would limit the amount of tax free pension contributions I could do in the future.  Ultimately for me it's not an issue as I won't be working enough to actually hit even the £4k limit.

Yes, I am intending to work, so yes if it is within this tax year I will have to take any income into account. Unlikely to be much as all jobs seem to be at minimum wage these day, (and frankly not worth it, as quite physical manual labour which at my age is crippling). 
I do need to get my national insurance contributions up to qualify for full state pension, so that will be a consideration.

Frances63

xylophone said:

With regard to savings interest, had you read the link in my post above?

Let's take a person whose only non savings income is from a part time job - he earns £10,570 a year.

He has a savings account (non ISA) from which he receives £8000 a year in interest.

He is not liable for tax on that interest.

£2000 is covered by the balance of his personal allowance, £5000 is covered by the starter rate for savings and £1000 is covered by the personal savings allowance.

If his savings income was only £7000, he would not use the PSA.

If it was £2000, he would not need to use the starter rate for savings or the PSA.

You mention that in the tax year 1922/23 you would anticipate non savings income of £12570.

This would be earnings/benefits/ monthly DB pension income/ a lump sum of income taken from your DC pension.

If your taxable savings interest was anything up to £6000, you would not be liable for tax thereon because you could use the starting rate for savings and the PSA.

If it were only £1000, you would not use the PSA because you could use the starter rate for savings.

Thank you Xylophone, that is really helpful.

I hadn't fully understood about the 5,000 starter rate as never qualified for it before this tax year and so was only concerned with the 1,000 nil rate band. 

I now see that the starter rate comes first, before nil rate needs to come into the equation.

All a bit academic with my savings anyway, but very 'interesting' (see what I did there?  ). 
Good to know.

Frances63

Just out of curiosity, do I need to decare my Nationwide switch bonus (200 pounds) anywhere? NW pay it straight into your account so it seems to have by-passed the tax system? I guess its still an income that's taxable?

Dazed_and_C0nfused

Frances63 said:

Just out of curiosity, do I need to decare my Nationwide switch bonus (200 pounds) anywhere? NW pay it straight into your account so it seems to have by-passed the tax system? I guess its still an income that's taxable?

No, it's not taxable income.

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim100210

Albermarle

Frances63 said:

Brie said:

Are you intending to work in the future??  (you are collecting JSA after all.....)

If so you may want to be careful about getting anything out of the DC scheme.  I'm still a bit confused by it all but I was told that putting my DC schemes into drawdown (which seemed to be the only option to collect them) would limit the amount of tax free pension contributions I could do in the future.  Ultimately for me it's not an issue as I won't be working enough to actually hit even the £4k limit.

Yes, I am intending to work, so yes if it is within this tax year I will have to take any income into account. Unlikely to be much as all jobs seem to be at minimum wage these day, (and frankly not worth it, as quite physical manual labour which at my age is crippling). 
I do need to get my national insurance contributions up to qualify for full state pension, so that will be a consideration.

If necessary you can buy NI qualifying years. It costs about £850 per year. It is a bargain as you get back around £265 pa guaranteed income for maybe 20 or 30 years, all with inflation rises ( so far ) 

Frances63

Thanks Albermarle. I need half a year only so I guess I pay just 425, will definitely look into that.

molerat

Frances63 said:

Thanks Albermarle. I need half a year only so I guess I pay just 425, will definitely look into that.

Tour pension forecast will show how much you need to pay but if you are basing "half a year" on only having worked for half the year you may be pleasantly surprised and the year may actually be full.

Frances63

Thanks Molerat.  Is that for Real? Why is that? 
Is it right I can pay back any missing amount several years later? 
It's just that the state pension forecast online is a bit behind so I have no idea what top up I need to pay until after the 'half' year is over. And I thought then half years didn't count towards the pension but had to be a full year?

molerat

What year are you needing ?

If you earn 52 x the LEL with each pay packet being above the LEL and counting only the income up to the UEL then you will get a full year.  So earning £6396 in a part year can get you a full year of NI.