tax free draw from pots

MidlandsGlory

I am planning early retirement soon as I have accumulated a good bundle of pensions over the years.

I would like to take a cash sum to 'set some things up' and understand I can take 20% of the funds tax free but that is confusing me.

Suppose I had 2 pensions with 50K in and a 3rd with 100K in and I wanted to draw out 20K, am I right to suppose I would have to draw the 20K from the 100K pot and not from one of the 50K ones, in other words, they are not all treated as one big 200K pot for tax purposes? Or I could take 5K from the 2 smaller ones and 10K from the big one and it would all be tax free?

Thanks.. I know this is basic 101 stuff.

Pat38493

MidlandsGlory said:

I am planning early retirement soon as I have accumulated a good bundle of pensions over the years.

I would like to take a cash sum to 'set some things up' and understand I can take 20% of the funds tax free but that is confusing me.

Suppose I had 2 pensions with 50K in and a 3rd with 100K in and I wanted to draw out 20K, am I right to suppose I would have to draw the 20K from the 100K pot and not from one of the 50K ones, in other words, they are not all treated as one big 200K pot for tax purposes? Or I could take 5K from the 2 smaller ones and 10K from the big one and it would all be tax free?

Thanks.. I know this is basic 101 stuff.

Yes you are correct - you can take 25% (it's 25 not 20) from each individual pot tax free - you cannot transfer part of the 25% from one to the other.

MidlandsGlory

Pat38493 said:

MidlandsGlory said:

I am planning early retirement soon as I have accumulated a good bundle of pensions over the years.

I would like to take a cash sum to 'set some things up' and understand I can take 20% of the funds tax free but that is confusing me.

Suppose I had 2 pensions with 50K in and a 3rd with 100K in and I wanted to draw out 20K, am I right to suppose I would have to draw the 20K from the 100K pot and not from one of the 50K ones, in other words, they are not all treated as one big 200K pot for tax purposes? Or I could take 5K from the 2 smaller ones and 10K from the big one and it would all be tax free?

Thanks.. I know this is basic 101 stuff.

Yes you are correct - you can take 25% (it's 25 not 20) from each individual pot tax free - you cannot transfer part of the 25% from one to the other.

ah yes thank you. Sorry, I had 20% in my mind as it made the example scenario easier!