TFLS - Self Assessment

poseidon1

tony4147 said:

xylophone said:

I haven’t touched my pension since I started it, I have approx £120k that can be withdrawn as a TFLS, I’m thinking of withdrawing maybe £10-20k

You have a  Defined Contribution Pension currently valued at £480,000? It has no "safeguarded benefits", for example a Guaranteed Annuity Rate?

You indicate that you have not yet accessed this pension.

It is not the workplace pension to which you are currently contributing?

Before you access the pension, it would be a good idea to have an interview with Pension Wise.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/book-a-free-pension-wise-appointment

Are you intending to take  a UFPLS?

See https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/your-options-for-using-your-defined-contribution-pension-pot#Accessing-your-defined-contribution-pension-pot---your-options

Are you aware of Money Purchase Annual Allowance?

https://www.mandg.com/wealth/adviser-services/tech-matters/pensions/annual-allowance/money-purchase-annual-allowance

Plenty of information there that I don’t require!
I'm asking a simple question that no one seems to be able to answer.
Yes my pot is £480k, there is no GAR, yes I know about MPAA. I’m 61 and will continue to work another 4 years and contribute £40k / yr into my SIPP.
So currently as my pension stands £120k can be taken as a TFLS, I would like to withdraw a small part of that, but what I don’t know is the mechanics of doing it, will my SIPP provider inform HMRC? Will I be put onto an emergency tax code? Will I have to complete a self assessment or some other form to reclaim tax if HMRC were to tax me? 

Hi OP can now see what you are getting at. See below link to HL' s explanation on how you access just part of your tax free cash:

https://www.hl.co.uk/retirement/drawdown/how-it-works

So to put some flesh on the bones on say a £20k withdrawal, you move £80k into 'Drawdown' .

From this you can now request your £20k TFC , leaving the remaining £60k in the Drawdown pot to grow further. This TFC is not declarable by you for tax purposes, but your provider must report it so as to ensure HMRC have a record of how much of the new capped £ 268,275 TFC you have utilised to date.

As for the remaining £60k  'Drawdown' pot any future payments from that source is fully taxed as income at your marginal rate with you Sipp provider deducting tax at source . That pot can no longer generate further tax free cash.

tony4147

Marcon said:

molerat said:

Commencing a pension will not mean you need to SA.  Why do you think it would? As far as the taxman is concerned a pension is just another PAYE income stream and the TFLS is of no interest to them.

Dazed_and_C0nfused said:

tony4147 said:

I’m thInking of taking some of my TFLS whilst I’m still working, will this trigger me having to do a self assessment? Currently I don’t do one

Why would some tax free income trigger the need for Self Assessment 🤔

OP is asking because they don't know - and wisely are checking things before going any further. It's all very well for those who are familiar with the arcane world of pensions to be dismissive of what they clearly see as a 'silly question' but in my book the only silly question is the one you DON'T ask.

xylophone said:

What exactly do you mean when you say "part" of your TFLS?

Er - part of their TFLS, or 'not the whole of my TLFS', or 'part of my TFLS'....

Nail on the head

tony4147

poseidon1 said:

tony4147 said:

xylophone said:

I haven’t touched my pension since I started it, I have approx £120k that can be withdrawn as a TFLS, I’m thinking of withdrawing maybe £10-20k

You have a  Defined Contribution Pension currently valued at £480,000? It has no "safeguarded benefits", for example a Guaranteed Annuity Rate?

You indicate that you have not yet accessed this pension.

It is not the workplace pension to which you are currently contributing?

Before you access the pension, it would be a good idea to have an interview with Pension Wise.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/book-a-free-pension-wise-appointment

Are you intending to take  a UFPLS?

See https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/your-options-for-using-your-defined-contribution-pension-pot#Accessing-your-defined-contribution-pension-pot---your-options

Are you aware of Money Purchase Annual Allowance?

https://www.mandg.com/wealth/adviser-services/tech-matters/pensions/annual-allowance/money-purchase-annual-allowance

Plenty of information there that I don’t require!
I'm asking a simple question that no one seems to be able to answer.
Yes my pot is £480k, there is no GAR, yes I know about MPAA. I’m 61 and will continue to work another 4 years and contribute £40k / yr into my SIPP.
So currently as my pension stands £120k can be taken as a TFLS, I would like to withdraw a small part of that, but what I don’t know is the mechanics of doing it, will my SIPP provider inform HMRC? Will I be put onto an emergency tax code? Will I have to complete a self assessment or some other form to reclaim tax if HMRC were to tax me? 

Hi OP can now see what you are getting at. See below link to HL' s explanation on how you access just part of your tax free cash:

https://www.hl.co.uk/retirement/drawdown/how-it-works

So to put some flesh on the bones on say a £20k withdrawal, you move £80k into 'Drawdown' .

From this you can now request your £20k TFC , leaving the remaining £60k in the Drawdown pot to grow further. This TFC is not declarable by you for tax purposes, but your provider must report it so as to ensure HMRC have a record of how much of the new capped £ 268,275 TFC you have utilised to date.

As for the remaining £60k  'Drawdown' pot any future payments from that source is fully taxed as income at your marginal rate with you Sipp provider deducting tax at source . That pot can no longer generate further tax free cash.

Thanks for answering my question 

poseidon1

tony4147 said:

poseidon1 said:

tony4147 said:

xylophone said:

I haven’t touched my pension since I started it, I have approx £120k that can be withdrawn as a TFLS, I’m thinking of withdrawing maybe £10-20k

You have a  Defined Contribution Pension currently valued at £480,000? It has no "safeguarded benefits", for example a Guaranteed Annuity Rate?

You indicate that you have not yet accessed this pension.

It is not the workplace pension to which you are currently contributing?

Before you access the pension, it would be a good idea to have an interview with Pension Wise.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/book-a-free-pension-wise-appointment

Are you intending to take  a UFPLS?

See https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/your-options-for-using-your-defined-contribution-pension-pot#Accessing-your-defined-contribution-pension-pot---your-options

Are you aware of Money Purchase Annual Allowance?

https://www.mandg.com/wealth/adviser-services/tech-matters/pensions/annual-allowance/money-purchase-annual-allowance

Plenty of information there that I don’t require!
I'm asking a simple question that no one seems to be able to answer.
Yes my pot is £480k, there is no GAR, yes I know about MPAA. I’m 61 and will continue to work another 4 years and contribute £40k / yr into my SIPP.
So currently as my pension stands £120k can be taken as a TFLS, I would like to withdraw a small part of that, but what I don’t know is the mechanics of doing it, will my SIPP provider inform HMRC? Will I be put onto an emergency tax code? Will I have to complete a self assessment or some other form to reclaim tax if HMRC were to tax me? 

Hi OP can now see what you are getting at. See below link to HL' s explanation on how you access just part of your tax free cash:

https://www.hl.co.uk/retirement/drawdown/how-it-works

So to put some flesh on the bones on say a £20k withdrawal, you move £80k into 'Drawdown' .

From this you can now request your £20k TFC , leaving the remaining £60k in the Drawdown pot to grow further. This TFC is not declarable by you for tax purposes, but your provider must report it so as to ensure HMRC have a record of how much of the new capped £ 268,275 TFC you have utilised to date.

As for the remaining £60k  'Drawdown' pot any future payments from that source is fully taxed as income at your marginal rate with you Sipp provider deducting tax at source . That pot can no longer generate further tax free cash.

Thanks for answering my question 

For completeness, and since you wish to continue £40k annual pension contributions for 4 years, any subsequent withdrawal from the remaining £60 k Drawdown pot will trigger MPAA, so great care needed in this regard.