Small lump sums from drawdown

MikMikandThriceMik

Livesight says I can take a regular income of differing amounts as a drawdown.
Pension wise says I can tak a regular income as drawdown but I will be taxed on anything over the £12570 threshold.
Pension wise then says I can take small lump sum amounts every month which is 25%tax free and only 75% is then taxed as income. Does this mean that I will be taxed on 75% of the pension on top of the tax I would pay if this 75% goes over £12570?
Is there a calculator formula which can work out is it better to get various lump sums and be taxed on the 75%, or whether it is better to just go for the straight drawdown?

Thank you.

Marcon

MikMikandThriceMik said:

Livesight says I can take a regular income of differing amounts as a drawdown.
Pension wise says I can tak a regular income as drawdown but I will be taxed on anything over the £12570 threshold.
Pension wise then says I can take small lump sum amounts every month which is 25%tax free and only 75% is then taxed as income. Does this mean that I will be taxed on 75% of the pension on top of the tax I would pay if this 75% goes over £12570?
Is there a calculator formula which can work out is it better to get various lump sums and be taxed on the 75%, or whether it is better to just go for the straight drawdown?

Thank you.

You will only be taxed on taxable income over the £12570 threshold.

Assuming you've not yet taken any tax free cash, 25% of each drawdown will be tax free. Only the other 75% will be (potentially) taxable income - but will be tax free provided you keep below £12570.

If you take 25% of your whole 'pot' at the outset, then every future drawdown will be taxable at 75%, but again, you can have up to £12570 and stay within your personal allowance.

The above assumes you have no other taxable income. If you do, it will need to be added in and you'll obviously reach the £12570 more quickly.

DE_612183

Marcon said:

MikMikandThriceMik said:

Livesight says I can take a regular income of differing amounts as a drawdown.
Pension wise says I can tak a regular income as drawdown but I will be taxed on anything over the £12570 threshold.
Pension wise then says I can take small lump sum amounts every month which is 25%tax free and only 75% is then taxed as income. Does this mean that I will be taxed on 75% of the pension on top of the tax I would pay if this 75% goes over £12570?
Is there a calculator formula which can work out is it better to get various lump sums and be taxed on the 75%, or whether it is better to just go for the straight drawdown?

Thank you.

You will only be taxed on taxable income over the £12570 threshold.

Assuming you've not yet taken any tax free cash, 25% of each drawdown will be tax free. Only the other 75% will be (potentially) taxable income - but will be tax free provided you keep below £12570.

If you take 25% of your whole 'pot' at the outset, then every future drawdown will be taxable at 75%, but again, you can have up to £12570 and stay within your personal allowance.

The above assumes you have no other taxable income. If you do, it will need to be added in and you'll obviously reach the £12570 more quickly.

Not taxed at 75%, but at the prevailing rate of income tax...

xylophone

Are you currently drawing your NILGOSC pension?

Are you drawing any other pensions?

Do you have other taxable income over and above pension income?

For example, if your current gross taxable income is eg £15,000 per annum and you access Lifesight (valued at say £50,000) you could take a 25% PCLS of £12,500 - any further amounts drawn down would be taxable income

Or you might choose UFPLS - you might draw down (say)  £5000, 25% of which would be tax free and the balance taxable.

MikMikandThriceMik

I am taking my nilgosc DB pension and I got a lump sum from it already. 
I can't take lump sum cos DC pot is so small, I was just wondering if there was a threshold at which it is better to take a lump sum and get taxed on the rest of just take a regular drawdown and get taxed at 20% on the monthly drafown pension type sjary.
Thank you.

xylophone

What is the value of the Lifesight pension?

MikMikandThriceMik

xylophone said:

What is the value of the Lifesight pension?

It is £210000

xylophone

It is £210000

And this is the DC pension to which you refer?

If so, what do you mean by

I can't take lump sum cos DC pot is so small,

xylophone

Looking over your previous posts, you do seem rather confused about your   DB/DC/ state pension provision. 

With regard to your state pension, what exactly does your state pension forecast

https://www.gov.uk/check-state-pension

show under Estimate to 5/4/23?

When do you reach SPA?

Are you still working and earning a salary as well as drawing your Local Government pension?

If so, does the Lifesight pension relate to this employment?

QrizB

xylophone said:

With regard to your state pension, what exactly does your state pension forecast

See this thread:

https://forums.moneysavingexpert.com/discussion/6503052/gov-ni-contributions-wrong

xylophone

You have said that for a number of years, you were a member of a local government  defined benefit pension scheme and left this employment with a deferred pension which you are now drawing.

While you were a member of the scheme, you were contracted out of additional state pension.

At 6/4/16, your "starting amount" for new state pension was calculated as the higher of

Old SP

NI qualifying years/30 x Full Basic SP + (  Additional State Pension - Deduction for Contracting Out)

New SP

(NIQY/35 x Full NSP) - COPE

In your case the higher amount was given by the old rules calculation.

It was either equal to or less than a full NSP.

If less than, your NI contributions from 6/4/16 onwards improved your starting amount up to (but not in excess of) a  full NSP - once you reached that point, while you still paid NI (and will continue to do so up to SPA if working and earning the relevant amount), this will not improve your SP.

Your SP will revalue up to and beyond  your drawing it at SPA under (currently) the Triple Lock.

If you check your forecast after 6/4/24 for the 24/25 tax year, it will show £221.20.

If you fully retired now and so paid no NI, it would not affect your entitlement to the full NSP at whatever that is in 2032.


At the moment, you are drawing both a pension and a salary - presumably your tax codes on these payments reflect this fact.

You appear to have a LIfesight pension  which you have not yet accessed.

Is this with your current employer?

If not, are you a member of your current employer's workplace scheme?

Do you have other pensions not yet in payment?