Drawdown pension interest

markythesparky1

This may seem like a very trivial question but I have received conflicting advice, and so I'm hoping someone out there will be able to give me a definitive answer. I currently have a small amount of money sitting in a drawdown pension with a well-known investment company. I recently made the decision to receive interest only and pull out of one of their investment portfolios, and so I have started receiving an interest payment every month. My question is: am I correct in thinking that I have to declare this as untaxed interest to the Inland Revenue even though it is in a pension drawdown account? Thanks.

dunstonh

My question is: am I correct in thinking that I have to declare this as untaxed interest to the Inland Revenue even though it is in a pension drawdown account?

Interest earned in a pension is tax free.
However, if you have elected to have natural income paid out under drawdown then it will be taxed under income tax unless you are using phased UFPLS, where it will be split 25% tax free and 75% taxable.

markythesparky1

dunstonh said:

My question is: am I correct in thinking that I have to declare this as untaxed interest to the Inland Revenue even though it is in a pension drawdown account?

Interest earned in a pension is tax free.
However, if you have elected to have natural income paid out under drawdown then it will be taxed under income tax unless you are using phased UFPLS, where it will be split 25% tax free and 75% taxable.

Thank you very much. I really appreciate your help regarding this matter.

Dazed_and_C0nfused

And if you take money out of the pension it will be pension income for tax purposes, not interest.

RogerPensionGuy

markythesparky1 said:

This may seem like a very trivial question but I have received conflicting advice, and so I'm hoping someone out there will be able to give me a definitive answer. I currently have a small amount of money sitting in a drawdown pension with a well-known investment company. I recently made the decision to receive interest only and pull out of one of their investment portfolios, and so I have started receiving an interest payment every month. My question is: am I correct in thinking that I have to declare this as untaxed interest to the Inland Revenue even though it is in a pension drawdown account? Thanks.

A good question. 

I know of 2 silly questions thou.

1. A question not asked.

2. A question asked, but not answered or the answer not understood, remembered or used effectively.