25% Tax Free Option

Albert0500

Just wondering what peoples views are on taking the 25% Tax free element on your pension.

Either:

25% as one of lump sum or 25% of regular drawdowns.

Interested on what people think?

leosayer

Welcome to the forum.

I think you'll find there have been numerous threads on this topic over the past few days. If you have a specific question about your own circumstance then please ask.

Albert0500

Should I take my 25% as a lump sum of split over amounts drawn down ?

intrestrested  in your views please?

El_Torro

If you need the money (for example to pay off a mortgage) then it might be best to take the lump sum. If you don't have a specific need for this money then it's generally not a good idea to take the lump sum. 

leosayer

If you want to keep the money saved then it's probably best not to take it in one lump.

However if you need the lump sum for something then taking it may be the best idea. 

Without a lot more details about your financial situation and plans it's hard to say much more than that.

Albert0500

leosayer said:

If you want to keep the money saved then it's probably best not to take it in one lump.

However if you need the lump sum for something then taking it may be the best idea. 

Without a lot more details about your financial situation and plans it's hard to say much more than that.

I don't have any debt, no mortgage etc, I have a drawdown pension and small final salary pension currently in payment, i'm 57 and looking to retire, just concerned about giving up once in a lifetime option of reasonable size lump sum.

i don't really know a lot about it, but i can live with each option fairly comfortably, just want to take the best option long term.

kempiejon

What the best option long term is personal and specific, probably not a generic definitive best..

Tax, income and inheritance are the current swingers for me. I have changed my mind several times. Currently my thinking is take the 25% lump sum first and then up to the £12500 annual allowance from the SIPP. I used to think it better to take regular payments with 25% tax free, again to use up the allowance. I changed my mind to extract more tax free money from my SIPP before I take the state pensions when all my SIPP withdrawals will be taxed.
However that leaves more of my estate open for inheritance tax.

Albert0500

Last question, i can take 50k including other income before moving into higher rate tax.

Therefore when taking money from drawdown that has the 25% tax free element, can i therefore withdraw 62.5k in anyone tax year with 50k being treated as income for tax purposes with the 12.5k which is the 25% tax free element, will that just be ignored and not take me into the higher tax bracket?

This is assuming monies only come from this drawdown with nothing else.

BoxerfanUK

Albert0500 said:

Last question, i can take 50k including other income before moving into higher rate tax.

Therefore when taking money from drawdown that has the 25% tax free element, can i therefore withdraw 62.5k in anyone tax year with 50k being treated as income for tax purposes with the 12.5k which is the 25% tax free element, will that just be ignored and not take me into the higher tax bracket?

This is assuming monies only come from this drawdown with nothing else.

Your 25% tax free element WILL NOT be taken into account as income for tax purposes.

Albert0500

BoxerfanUK said:

Albert0500 said:

Last question, i can take 50k including other income before moving into higher rate tax.

Therefore when taking money from drawdown that has the 25% tax free element, can i therefore withdraw 62.5k in anyone tax year with 50k being treated as income for tax purposes with the 12.5k which is the 25% tax free element, will that just be ignored and not take me into the higher tax bracket?

This is assuming monies only come from this drawdown with nothing else.

Your 25% tax free element WILL NOT be taken into account as income for tax purposes.

Thanks for your reply, just checking I understand you probably, so I can effectively drawdown 62.5k and just stay under 40% tax bracket? 

MallyGirl

12.5 is not 25% of 62.5