Tax free cash calculation

TheGreenFrog

I am intending to take the tax free sum from my pension later this year.  I am still working so do not currently need any regular pension income, but I do have a need for the tax free cash element later this year.  My pension comprises a SIPP and a legacy workplace DC scheme and I am now over the lifetime allowance.  

I am wondering how I go about getting the tax free cash - if I just had the SIPP it would be straightforward I think, but the workplace scheme may add complication because I am over the lifetime allowance and the workplace pension seems to entitle me to enhanced tax free cash.  The workplace pension is approx £140k and when I asked the trustee a few months ago they said that the £140k pension entitled me to approx £80k tax free cash (if taken then), but I did not tell them about my SIPP or that I was over the lifetime allowance.  

Any pointers as to how the tax free cash is calculated for each pension and how I can co-ordinate accessing it between the two providers will be gratefully received.  For example the SIPP is by itself just over the lifetime allowance so if I took cash from that presumably they would pay the entire tax free entitlement, but where would that leave the workplace pension?  Or do I tell them both and they co-ordinate so that the total amount is split between them - but if so what happens to the enhanced amount from the workplace pension?  I am very confused!

xylophone

https://techzone.abrdn.com/public/pensions/Tech-guide-tax-free-cash

https://www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot/lifetime-allowance-for-pension-savings

If an IFA is required you could try 

https://adviserbook.co.uk/

Tick "confirmed independent" and other boxes as required.

QrizB

If you're planning to take your full LTA allowance of TFC now, I don't see that it matters that much how you do it. However much "enhanced TFC" you take from the workplace scheme is TFC you can't take from the SIPP.  You might as well just take it from the SIPP.

If you're thinking of only taking part of it, it still might not matter but it's slightly less clear to me.

TheGreenFrog

QrizB said:

If you're planning to take your full LTA allowance of TFC now, I don't see that it matters that much how you do it. However much "enhanced TFC" you take from the workplace scheme is TFC you can't take from the SIPP.  You might as well just take it from the SIPP.

If you're thinking of only taking part of it, it still might not matter but it's slightly less clear to me.

I was wondering whether, because of the enhanced TFC in the workplace scheme, that might mean I could in total be entitled to more TFC than the 25% of LTA.  My reading of your reply is that the answer to that is no?

QrizB

TheGreenFrog said:

QrizB said:

If you're planning to take your full LTA allowance of TFC now, I don't see that it matters that much how you do it. However much "enhanced TFC" you take from the workplace scheme is TFC you can't take from the SIPP.  You might as well just take it from the SIPP.

If you're thinking of only taking part of it, it still might not matter but it's slightly less clear to me.

I was wondering whether, because of the enhanced TFC in the workplace scheme, that might mean I could in total be entitled to more TFC than the 25% of LTA.  My reading of your reply is that the answer to that is no?

I'm not necessarily right, I'm just a random person on the internet with an opinion! The post by xylophone above points you to the rules, and how to get professional advice.

jamesd

You wrote that you are over the lifetime allowance. Please clarify, do you mean that:

1. You have already made pension withdrawals that have used at least 100% of the lifetime allowance?

2. You have not yet made any pension withdrawals but the total value of your pots is greater than the lifetime allowance?

3. Something else?

Have you filed for any of the pension lifetime allowance protection schemes? Which?

TheGreenFrog

jamesd said:

You wrote that you are over the lifetime allowance. Please clarify, do you mean that:

1. You have already made pension withdrawals that have used at least 100% of the lifetime allowance?

2. You have not yet made any pension withdrawals but the total value of your pots is greater than the lifetime allowance?

3. Something else?

Have you filed for any of the pension lifetime allowance protection schemes? Which?

Hello, I have not yet made any pension withdrawals but the value of my pots is greater than the lifetime allowance.  I stopped contributing to my workplace pension in 1998.  I filed for the 2016 protection so have not contributed to my SIPP since that time.