How to avoid paying too much tax on first drawdown?

NedS

eastcorkram said:

Is there a reason why you and the OP are doing this yearly? Is it possible to have it set up to withdraw monthly, then you wouldn't have to faff about reclaiming over paid tax .

I've not quite got to the drawdown stage myself, but imagined I'd just do it once a month.

They are very different methods, each with their own advantages and disadvantages depending upon your own personal set of circumstances. One is setting up regular monthly income from crystallised funds after taking the 25% tax free lump sum, the other is taking irregular (yearly) lump sums from uncrystallised funds, of which 25% will be tax free. You may not want to take 25% tax free lump sum of your entire pension in one go - what would you do with it? If you are happy to take 25% lump sum in full and prefer a regular monthly income, then that solution no doubt looks attractive to you.

Albermarle

NedS said:

eastcorkram said:

Is there a reason why you and the OP are doing this yearly? Is it possible to have it set up to withdraw monthly, then you wouldn't have to faff about reclaiming over paid tax .

I've not quite got to the drawdown stage myself, but imagined I'd just do it once a month.

They are very different methods, each with their own advantages and disadvantages depending upon your own personal set of circumstances. One is setting up regular monthly income from crystallised funds after taking the 25% tax free lump sum, the other is taking irregular (yearly) lump sums from uncrystallised funds, of which 25% will be tax free. You may not want to take 25% tax free lump sum of your entire pension in one go - what would you do with it? If you are happy to take 25% lump sum in full and prefer a regular monthly income, then that solution no doubt looks attractive to you.

It is also possible to take regular monthly payments , with some tax free and some taxable. However it seems from comments on other threads, that some providers do not offer this facility. In this case one solution is to take one yearly payment , 25% tax free and 75% taxable, and put it in an easy access savings account, and then draw from it when needed. It also simplifies tax issues especially if you take it late in the tax year.