pension help

billozz

i have been advised of a pension which i took out some years ago ad lost touch with, they tracked me to my current address via nat ins number.
its owrth about 10k so not really enough for an annuity so i am considering taking it as a lump sum but wonder what is the best way from a tax point of view.
i am 65 this year and my state pension age is 66. i am self employed and earn about 25k per year. i am aware that if i take it a s a lump sum i will get 25% tax freee and i will then pay tax on the balance at 25% i guess as i will use my allowance for my salary. can anyone suggest a better way? for instance is there a benefit to waiting until i am drawing my state pension?
thank you so much
regards
bill

xylophone

i am 65 this year and my state pension age is 66.

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

The point is that anything over your tax free Pension Commencement Lump Sum counts as taxable income.

If you take it in this tax year  and you have a standard PA then you will owe tax at 20% on £7500 of this personal pension.

Let's suppose that you give up paid employment when your SP commences in April 2024, that it is your only income and that your SP is around  £11,000 a year.

You decide to take the £10,000 personal pension at that point.

£7500 of it is taxable income.

Your total taxable income will be £18,500.

You have a Personal Allowance of £12,570.

You will owe tax at 20% on £5930 of the pension.

ader42

If not in a hurry for the money then after the 25% TFLS take it bit by bit to top up your state pension to the Personal Allowance so it’s all tax free?