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

eastcorkram

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.

Presumably, unless I've missed it, you're old enough to do this......

Dazed_and_C0nfused

ThisIsWeird said:

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?

Yes, it's when you fill in a tax return that it's not automatic i.e. it's up to you when you file your return.

If you don't file a return then it's automatic.

https://www.gov.uk/tax-overpayments-and-underpayments

ThisIsWeird

eastcorkram 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.

Presumably, unless I've missed it, you're old enough to do this......

Alas, yes. :-)

ThisIsWeird

Dazed_and_C0nfused said:

ThisIsWeird said:

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?

Yes, it's when you fill in a tax return that it's not automatic i.e. it's up to you when you file your return.

If you don't file a return then it's automatic.

https://www.gov.uk/tax-overpayments-and-underpayments

Cool. Thanks :-)

Albermarle

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.

You might be surprised that a £1500 pa guaranteed pension with inflation linking ( if that is what it is ) is probably worth a similar amount to the £35K pot that you want to withdraw. Maybe more.

The cost and value of these public sector pensions is routinely underrated.

ThisIsWeird

Albermarle said:

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.

You might be surprised that a £1500 pa guaranteed pension with inflation linking ( if that is what it is ) is probably worth a similar amount to the £35K pot that you want to withdraw. Maybe more.

The cost and value of these public sector pensions is routinely underrated.

I agree. I'm pleasantly surprised at how helpful the current £160pm is - handles the energy bill nicely.

We are currently asset-ok, but savings not-so-much, so when we need around £10k for a new car, this is the easy way to go.

The future should be ok, but the 'current' needs a help :-)

SarahB16

MallyGirl said:

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 

Could I ask how this differs to taking £16,760 per annum?  In the example I set out below this would enable the rest of the DC pot to continue to (hopefully) grow but in the scenario being discussed above does this crystallise (if that is the right term) the fund and freeze any future growth?  

I'm trying to understand the difference between the two scenarios, i.e. compared to taking 25% of the whole pot in year 1 plus £12,570 (personal allowance) versus taking £16,760 in one year. 

I had always been under the impression that the maximum that could be taken tax free from a modern DC pension was £16,760 comprising of 25% being tax free so £4,190 and the other 75% (£12,570) being taxable but covered by the personal allowance.  

The thread above gives the impression an amount greater than £16,760 can be taken tax free in year 1 but what does this mean for the remaining DC pot and the withdrawal in year 2 (both scenarios assuming no other taxable income)? 

Thank you for any helpful replies.  

Dazed_and_C0nfused

SarahB16 said:

MallyGirl said:

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 

Could I ask how this differs to taking £16,760 per annum?  In the example I set out below this would enable the rest of the DC pot to continue to (hopefully) grow but in the scenario being discussed above does this crystallise (if that is the right term) the fund and freeze any future growth?  

I'm trying to understand the difference between the two scenarios, i.e. compared to taking 25% of the whole pot in year 1 plus £12,570 (personal allowance) versus taking £16,760 in one year. 

I had always been under the impression that the maximum that could be taken tax free from a modern DC pension was £16,760 comprising of 25% being tax free so £4,190 and the other 75% (£12,570) being taxable but covered by the personal allowance.  

The thread above gives the impression an amount greater than £16,760 can be taken tax free in year 1 but what does this mean for the remaining DC pot and the withdrawal in year 2 (both scenarios assuming no other taxable income)? 

Thank you for any helpful replies.  

In that example £35,000 is being crystallised in year 1.  With all of the TFLS being taken out straight away leaving £26,250 taxable element.

£12,570 of that is also taken in year 1 leaving £13,680 which will be taxable when taken.  If the £13,680 grows to say £20k and is then taken the whole £20k is taxable as the full TFLS was taken up front.

MallyGirl

SarahB16 said:

MallyGirl said:

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 

Could I ask how this differs to taking £16,760 per annum?  In the example I set out below this would enable the rest of the DC pot to continue to (hopefully) grow but in the scenario being discussed above does this crystallise (if that is the right term) the fund and freeze any future growth?  

I'm trying to understand the difference between the two scenarios, i.e. compared to taking 25% of the whole pot in year 1 plus £12,570 (personal allowance) versus taking £16,760 in one year. 

I had always been under the impression that the maximum that could be taken tax free from a modern DC pension was £16,760 comprising of 25% being tax free so £4,190 and the other 75% (£12,570) being taxable but covered by the personal allowance.  

The thread above gives the impression an amount greater than £16,760 can be taken tax free in year 1 but what does this mean for the remaining DC pot and the withdrawal in year 2 (both scenarios assuming no other taxable income)? 

Thank you for any helpful replies.  

The crystallised funds are not 'frozen'. They remain invested and they continue to grow but they will be fully taxable on withdrawal as you have already had the tax free bit.
you either slice off the full 25% tax free amount at the start (however much that is) and then take taxable chunks just under the threshold to avoid tax (£12570)
or
you take it in £16670 slices of which 25% is tax free and the rest stays under the threshold

option 1 gets you more out in the first year whereas option 2 is more even.

with much bigger pots option one raises points around large lump sums becoming liable for inheritance tax once out of the pension, where to put large sums of cash, etc. not a problem for you.

Qyburn

SarahB16 said:

MallyGirl said:

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 

Could I ask how this differs to taking £16,760 per annum?    

The £16,760 can be repeated every year, £4,190 tax free and £12,570 taxable.

The £21,320 is a one-off, no more tax free in any subsequent year. Better if you need more in the first year I guess.