How much can I withdraw from a private pension without paying tax?

ThisIsWeird

Hi.

As above. This is a small private pension - £35k - which is not worth keeping as a 'pension', so wish to use some to buy a car instead.

I understand the, "You can withdraw money from your pension pot as a lump sum. However only up to the first 25% is tax-free and doesn’t affect your personal tax allowance. Withdrawing anything more than this is taxable and so is added to any other income you receive which could push you into a higher tax bracket."

25% would be around £8,750.

What I don't understand is what this means as a non tax-payer, ie not earning an income.

The standard Personal Allowance is £12,570, I understand? So, can I withdraw the 25% amount plus the PA of £12,570 = £21,320 this tax year?

Thanks.

MallyGirl

as a non earner you can put the lot into drawdown - if it is a modern DC pension that supports such an activity - and withdraw the 25% tax free (£8750) plus the PA of £12,570 = £21,320 

ThisIsWeird

Thanks Mally - that's really helpful.

I'll give them a buzz tomorrow :-)

QrizB

ThisIsWeird said:

As above. This is a small private pension - £35k - which is not worth keeping as a 'pension', so wish to use some to buy a car instead.

I know you're a regular, but do you have solid financial plans for retirement that don't depend on this £35k?

Hypothetically, that £35k could buy you £1500pa index-linked for life from age 65. Might not sound like much, but it would eg. pay your grocery or energy bill.

ThisIsWeird

QrizB said:

ThisIsWeird said:

As above. This is a small private pension - £35k - which is not worth keeping as a 'pension', so wish to use some to buy a car instead.

I know you're a regular, but do you have solid financial plans for retirement that don't depend on this £35k?

Hypothetically, that £35k could buy you £1500pa index-linked for life from age 65. Might not sound like much, but it would eg. pay your grocery or energy bill.

I appreciate you asking, but we should be ok.

p00hsticks

Also bear in mind that you may have tax deducted initially, and have to claim a refund from HMRC, as I think Pension companies may have to treat the initial drawdown as if you are going to take it on a regular monthly basis. 

sammyjammy

So you have no income at all?  No other pension in payment or anything?

Albermarle

ThisIsWeird said:

Thanks Mally - that's really helpful.

I'll give them a buzz tomorrow :-)

If it is an old pension, you might find how you can withdraw it might be restricted. If so the way forward is to transfer it to a new pension, which is actually easy .
Also with some providers you might find them not so responsive in answering the phone etc. so would probably be a good idea to have a look at the paperwork you have, and/or their website, first to see if that enlightens you.

ThisIsWeird

sammyjammy said:

So you have no income at all?  No other pension in payment or anything?

No earned income as such, but there is an even weeer pension thingy from when I was a teacher - an add-on thingy. Good point - I'll need to take that into account, but it's tiny, around £1500 pa.

Thanks, p00h - yes, I understand I'll get stung initially, and then have to reclaim.

And, cheers, Albe - it is an old pension, but has been transferred to new owner a few times! Abbey and now Phoenix. It looks as tho' taking out a sum is ok.

Dazed_and_C0nfused

ThisIsWeird said:

sammyjammy said:

So you have no income at all?  No other pension in payment or anything?

No earned income as such, but there is an even weeer pension thingy from when I was a teacher - an add-on thingy. Good point - I'll need to take that into account, but it's tiny, around £1500 pa.

Thanks, p00h - yes, I understand I'll get stung initially, and then have to reclaim.

And, cheers, Albe - it is an old pension, but has been transferred to new owner a few times! Abbey and now Phoenix. It looks as tho' taking out a sum is ok.

You don't have to claim the tax back, if you do nothing HMRC will automatically refund any tax overpaid after the end of the tax year.

ThisIsWeird

Dazed_and_C0nfused said:

ThisIsWeird said:

sammyjammy said:

So you have no income at all?  No other pension in payment or anything?

No earned income as such, but there is an even weeer pension thingy from when I was a teacher - an add-on thingy. Good point - I'll need to take that into account, but it's tiny, around £1500 pa.

Thanks, p00h - yes, I understand I'll get stung initially, and then have to reclaim.

And, cheers, Albe - it is an old pension, but has been transferred to new owner a few times! Abbey and now Phoenix. It looks as tho' taking out a sum is ok.

You don't have to claim the tax back, if you do nothing HMRC will automatically refund any tax overpaid after the end of the tax year.

That I didn't know - cheers.

Even if you don't fill in an end-of-year tax return?