TF 25% restrictions

Agag

Hi,
I am 57 and on 40% tax bracket, i would like to take part of my 25% TF allowance, 10k ,
Are there any other restrictions to consider  eg, can I still pay in AVC's, is the max year limit still 60k, are there any other tax implications etc ?

Albermarle

Agag said:

Hi,
I am 57 and on 40% tax bracket, i would like to take part of my 25% TF allowance, 10k ,
Are there any other restrictions to consider  eg, can I still pay in AVC's, is the max year limit still 60k, are there any other tax implications etc ?

No tax implications if you only take tax free cash. You need to check with your provider that it is OK, especially if it is an old pension, as they can be less flexible in how you can withdraw from them.

xylophone

i would like to take part of my 25% TF allowance, 10k ,

This is definitely a Defined Contribution Pension with no safeguarded benefits?

Is this a plan to which you are currently contributing through your workplace?

Or is this just an old basic DC pension ?

 If so, be careful - you need to look into how you can take this pension and not trigger the Money Purchase Annual Allowance.

For a start, does your current pension plan offer full flexibility?

If it doesn't, then you'll need to consider a transfer to one that does.

You would probably find it useful to book an appointment with Pension Wise to discuss your options.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise

Brie

If this is an old workplace DC could taking a portion trigger a restriction in current payments into a new work scheme?  I know there was a change recently but that may have just been for drawdown.

xylophone

If this is an old workplace DC could taking a portion trigger a restriction in current payments into a new work scheme? 

If only the 25% tax free pension commencement lump sum is taken from the full value of the pension via Flexi Access Drawdown, then the Money Purchase Annual Allowance is not triggered.

If a pension counts as a "small pot", (value £10,000 or less), then under certain circumstances the whole can be taken (25% tax free, the balance taxable) without triggering the MPAA.

However, in an UFPLS type of drawdown, the MPAA can be triggered. 

Example, a person takes £40,000 on the UFPLS basis - 25% will be tax free and the balance taxable - the MPAA is triggered.

Some information here

https://consilium-ifa.co.uk/flexi-access-drawdown-and-ufpls-what-is-the-difference/#:~:text=UFPLS VS Drawdown,-As you are&text=When we compare flexible drawdown,in a series of events.

but note that the MPAA has been increased to £10,000.

Why not book an appointment with Pension Wise for guidance and to discuss your options?