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pensions pot

CosmicDancer_21
Posts: 5 Forumite

hello all,
hope i could get some advice here please, just found out i have a pension that i had totally forgot about, but due to earnings if i take it all it would push me into the next tax bracket,40%,
my questions are,
1, if i take the lot now would i pay higher tax on all my earnings for the rest of the year, or on just the amount over the 50000,
2, if i pay the higher tax would i be able to draw the pension next year like February or march and just pay the higher tax for a couple of months,
i can take a tax free amount then something like 50 a month for life,
thank you all so much , finding this a total mine field
:-)
hope i could get some advice here please, just found out i have a pension that i had totally forgot about, but due to earnings if i take it all it would push me into the next tax bracket,40%,
my questions are,
1, if i take the lot now would i pay higher tax on all my earnings for the rest of the year, or on just the amount over the 50000,
2, if i pay the higher tax would i be able to draw the pension next year like February or march and just pay the higher tax for a couple of months,
i can take a tax free amount then something like 50 a month for life,
thank you all so much , finding this a total mine field
:-)
0
Comments
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CosmicDancer_21 said:hello all,
hope i could get some advice here please, just found out i have a pension that i had totally forgot about, but due to earnings if i take it all it would push me into the next tax bracket,40%,
my questions are,
1, if i take the lot now would i pay higher tax on all my earnings for the rest of the year, or on just the amount over the 50000,
2, if i pay the higher tax would i be able to draw the pension next year like February or march and just pay the higher tax for a couple of months,
CosmicDancer_21 said:
i can take a tax free amount then something like 50 a month for life,
thank you all so much , finding this a total mine field
:-)
You could ask the scheme if 'total commutation' (taking the whole lot as cash) is possible under the scheme's rules, in which case you'd be taxed on anything over the tax free bit, and the balance would be added to your other taxable income for the tax year in which you receive it.
If you don't need the money now, do you have to take it now? Would waiting put you in a lower tax bracket (although at only £50 a money the extra tax isn't going to be a huge issue either way)? Check if there's a 'late retirement' option under the scheme rules.
Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!0 -
just found out i have a pension that i had totally forgot about,
What kind of pension?
https://www.gov.uk/pension-types
What information have you been given as to how you may access this pension?
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thanks you,
ill get back to you i think its one where i can take 25% then like 50 a month for life, but cant take so much this year and so much next, if you know what i mean, they will allow me to transfer to another provider, but im guessing i will loose money that way.0 -
CosmicDancer_21 said:thanks you,
ill get back to you i think its one where i can take 25% then like 50 a month for life, but cant take so much this year and so much next, if you know what i mean, they will allow me to transfer to another provider, but im guessing i will loose money that way.Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!0 -
ill get back to you i think its one where i can take 25% then like 50 a month for life, but cant take so much this year and so much next, if you know what i mean, they will allow me to transfer to another provider, but im guessing i will loose money that way.
Is this a defined benefit pension where you have been given a Cash Equivalent Transfer Value?
If so, what is it?
Can you name the pension scheme?
Post up the letter you have received (with personal details removed)?
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thanks, its a annuity pension, and i can take 1/4 tax free i realise that, just need to know if im best waiting till end of tax year to take some then take some more next tax year if poss or not
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thanks, its a annuity pension,
But this type of pension does pay a specific amount every month (or other period) after taking the PCLS.
Please can you indicate how this pension arose and the provider/administrator?
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On the original questions - couple of bits that sound unclear about how tax works ...
Nobody ever pays 40% on *all* their income - just the part above the relevant threshold.
And although PAYE tax is taken monthly, the tax you're due to pay is calculated on an annual basis - so it doesn't save any tax by "taking the lot now" in Feb or Mar. ( If you're allowed to "take the lot now" )
The "25% tax free" would be ignored in your tax calculation, but anything else you take would be added to your taxable income for the whole year.
If you don't need it immediately, why not leave it until you're no longer earning so that none of it gets taxed at 40% ? ( If you retire before state pension age and have no other income, you might even end up being able to take it and pay no tax at all, if you keep each annual withdrawal less than your annual tax free allowance.)
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CosmicDancer_21 said:thanks, its a annuity pension, and i can take 1/4 tax free i realise that, just need to know if im best waiting till end of tax year to take some then take some more next tax year if poss or not
Section 266 RACs are unlikely to support drawdown.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
heck, its so complex, im so confused, i can take 1/4 tax free, and so much a month for life, of take the whole lot,
if i do it would push me over the 50000 tax mark for 20%,
so would i pay,20% tax on my wage then 40% on everything over that amount? or would i pay 40% tax on the whole lot, wage, pension.
those are my options, or i can loose money by transferring it to another provider, where i can take it over a few years,
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