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UFPLS & October budget advice please

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Comments

  • blomft
    blomft Posts: 15 Forumite
    Sixth Anniversary 10 Posts
    kempiejon said:

    ok, thanks...so if I take the lump sum in one go and completely retired, I could put max £2880, but if I did that and still worked, I could put more (£10k) but no more due to MPAA. ?
    The MPAA is triggered by taking taxable income; the 25% doesn't trigger MPAA it's anything else taken from the pension like taking Uncrystallised Funds Pension Lump Sum (UFPLS) income of which 25% is tax free the rest taxed. Using the pension to buy an annuity doesn't trigger the MPAA.

    So if you still worked, took the 25% tax free you could contribute up to the maximum of your total relevant income. Until such time as you used any of your DC pension income.
    forgive me if I seem a bit thick here, but surely one couldn't take just the 25% TFC, if you took 25% of the pot, say £3000 from total of £12000, surely you would only get 25% of the £3000 that you took out, tax free?
    How could one separate the 25% from the rest and only take that portion out? 
  • MallyGirl
    MallyGirl Posts: 7,089 Senior Ambassador
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    blomft said:
    kempiejon said:

    ok, thanks...so if I take the lump sum in one go and completely retired, I could put max £2880, but if I did that and still worked, I could put more (£10k) but no more due to MPAA. ?
    The MPAA is triggered by taking taxable income; the 25% doesn't trigger MPAA it's anything else taken from the pension like taking Uncrystallised Funds Pension Lump Sum (UFPLS) income of which 25% is tax free the rest taxed. Using the pension to buy an annuity doesn't trigger the MPAA.

    So if you still worked, took the 25% tax free you could contribute up to the maximum of your total relevant income. Until such time as you used any of your DC pension income.
    forgive me if I seem a bit thick here, but surely one couldn't take just the 25% TFC, if you took 25% of the pot, say £3000 from total of £12000, surely you would only get 25% of the £3000 that you took out, tax free?
    How could one separate the 25% from the rest and only take that portion out? 
    you absolutely can just take the 25% tax free bit and leave the taxable (now called crystallised) portion in the pension. 
    I’m a Senior Forum Ambassador and I support the Forum Team on the Pensions, Annuities & Retirement Planning, Loans
    & Credit Cards boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com.
    All views are my own and not the official line of MoneySavingExpert.
  • Scrounger
    Scrounger Posts: 1,067 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    blomft said:
    kempiejon said:

    ok, thanks...so if I take the lump sum in one go and completely retired, I could put max £2880, but if I did that and still worked, I could put more (£10k) but no more due to MPAA. ?
    The MPAA is triggered by taking taxable income; the 25% doesn't trigger MPAA it's anything else taken from the pension like taking Uncrystallised Funds Pension Lump Sum (UFPLS) income of which 25% is tax free the rest taxed. Using the pension to buy an annuity doesn't trigger the MPAA.

    So if you still worked, took the 25% tax free you could contribute up to the maximum of your total relevant income. Until such time as you used any of your DC pension income.
    forgive me if I seem a bit thick here, but surely one couldn't take just the 25% TFC, if you took 25% of the pot, say £3000 from total of £12000, surely you would only get 25% of the £3000 that you took out, tax free? 
    No, the full £3000 is tax free.  It can even be paid back into a pension (£2,880 max if not working) to generate more tax-free cash!

    Doesn't get much better than this.  :)

    Scrounger
  • LHW99
    LHW99 Posts: 4,937 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    blomft said:
    kempiejon said:

    ok, thanks...so if I take the lump sum in one go and completely retired, I could put max £2880, but if I did that and still worked, I could put more (£10k) but no more due to MPAA. ?
    The MPAA is triggered by taking taxable income; the 25% doesn't trigger MPAA it's anything else taken from the pension like taking Uncrystallised Funds Pension Lump Sum (UFPLS) income of which 25% is tax free the rest taxed. Using the pension to buy an annuity doesn't trigger the MPAA.

    So if you still worked, took the 25% tax free you could contribute up to the maximum of your total relevant income. Until such time as you used any of your DC pension income.
    forgive me if I seem a bit thick here, but surely one couldn't take just the 25% TFC, if you took 25% of the pot, say £3000 from total of £12000, surely you would only get 25% of the £3000 that you took out, tax free?
    How could one separate the 25% from the rest and only take that portion out? 

    By doing that you have "crystallised" the whole pot. If you don't take the 75% taxable with the 25% tax-free, then it remains (invested) in the pension and is taxed at the appropriate rate when you do finally draw some of it out.
  • Albermarle
    Albermarle Posts: 25,902 Forumite
    10,000 Posts Sixth Anniversary Name Dropper
    blomft said:
    kempiejon said:

    ok, thanks...so if I take the lump sum in one go and completely retired, I could put max £2880, but if I did that and still worked, I could put more (£10k) but no more due to MPAA. ?
    The MPAA is triggered by taking taxable income; the 25% doesn't trigger MPAA it's anything else taken from the pension like taking Uncrystallised Funds Pension Lump Sum (UFPLS) income of which 25% is tax free the rest taxed. Using the pension to buy an annuity doesn't trigger the MPAA.

    So if you still worked, took the 25% tax free you could contribute up to the maximum of your total relevant income. Until such time as you used any of your DC pension income.
    forgive me if I seem a bit thick here, but surely one couldn't take just the 25% TFC, if you took 25% of the pot, say £3000 from total of £12000, surely you would only get 25% of the £3000 that you took out, tax free?
    How could one separate the 25% from the rest and only take that portion out? 
    You just ask the provider to pay you all the tax free cash, but nothing else. 
  • blomft
    blomft Posts: 15 Forumite
    Sixth Anniversary 10 Posts
    Right, I see,  This is good information, thanks very much.
     As an update to my own situation,  I took people's advice and decided to cross my fingers and close my eyes really really tight and wait until after the budget. 
    It was the right thing to do, as nothing changed...yet, So thank you all for your input
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