Should I stop taking a wage and take money from pension instead.

hoofy

Hi.

I'm 59 yo with 40 years full NI contributions.
I own a ltd co which makes around 50k profit a year.
I take a wage of around 12500 from my ltd co
I take all the rest of the ltd co profits as pension contributions.
I have a pension pot of 180k in a SIPP with Iweb.
I don't know if or when I will retire. No plans to do so yet.

Should I stop taking a wage from my ltd company and take money from my pension instead to avoid paying tax on the pension money? I'm thinking if I wait until I get state pension I will have missed the chance to have minimum earnings to go at with regards to drawing money from my pension.

NannaH

You could take yearly UFPLS to the tune of £16k+ from your pension and pay no tax. 

Your Personal allowance plus the tax free portion. 

Won’t you pay more tax at a later date when taking money from your company or are there better tax breaks for doing it that way? 

hoofy

NannaH said:

Won’t you pay more tax at a later date when taking money from your company or are there better tax breaks for doing it that way? 

I think I'll be able to take all of the company profit out every year as a pension contribution. So the plan would involve still paying into pension every year, maybe 50k, and taking £16k out of the pension every year.

There shouldn't be any money left in my company bank account accept for money to cover the running costs.

FIREDreamer

hoofy said:

NannaH said:

Won’t you pay more tax at a later date when taking money from your company or are there better tax breaks for doing it that way? 

I think I'll be able to take all of the company profit out every year as a pension contribution. So the plan would involve still paying into pension every year, maybe 50k, and taking £16k out of the pension every year.

There shouldn't be any money left in my company bank account accept for money to cover the running costs.

That will invoke MPAA limiting your future pension contributions to £10,000 per annum.

najan49

Once you take an UFPLS you will be constrained by the MPAA.

hoofy

OK thanks. 

NannaH

The only way not to invoke MPAA is by using ‘small pots’  withdrawals, but that’s limited to £10k per pot and I think there is a limit of the number of pots allowed? 

FIREDreamer

NannaH said:

The only way not to invoke MPAA is by using ‘small pots’  withdrawals, but that’s limited to £10k per pot and I think there is a limit of the number of pots allowed? 

Maximum of 3.

Marcon

FIREDreamer said:

NannaH said:

The only way not to invoke MPAA is by using ‘small pots’  withdrawals, but that’s limited to £10k per pot and I think there is a limit of the number of pots allowed? 

Maximum of 3.

Maximum of 3 from a personal pension.

No limit on the number of small pots you can take from an occupational scheme (but in practice it's self-limiting, for self-evident reasons).