Crystallising small amount of pension for first time prior to budget

gwapenut

Having just turned 55, I have not touched my pension.

Is there any merit in crystallising just £30k of my pension, with a view to taking £7500 tax free lump sum only (not drawing down any of the remaining crystallised £22500).

In my naive inexperienced mind, this might help by:
1. Getting a small lump sum prior to any reduction in lump sum limit (I am aware it may not do as well outside my pension especially as I can be conservative)
2. "Locking in" the fact that I have touched my pension, which may help if new rules are introdued for untouched pensions? Is this even a possible outcome?

Also, how quickly can the first ever crystallisation be turned around?

lisyloo

1. Does the reduction in affect you? i.e. do you have more than £400K?
2. Locking is less flexible as it brings restrictions

I would say 2-3 months normally as there is regulation around it. Tax checking, advice checking if using advice, compliance checking and just plain old processing time.
The rich might be able to get their advisors to drop everything.

Normally new rules are introduced ahead of time e.g. lump sum could be changed for April 2025 or later so it's generally not regarded as a good idea to act on speculation especially if it puts you at a disadvantage.

NoMore

I don’t believe anybody should be making decisions solely based on possible changes based on upcoming budget but what exactly does your first point achieve. If the lump sum allowance is reduced to say 100k then all you’ve achieved is you have 92.5k of it left compared to £260k ish with no changes. You will still be subject to the new LSA in your scenario. 

gwapenut

NoMore said:

I don’t believe anybody should be making decisions solely based on possible changes based on upcoming budget but what exactly does your first point achieve. If the lump sum allowance is reduced to say 100k then all you’ve achieved is you have 92.5k of it left compared to £260k ish with no changes. You will still be subject to the new LSA in your scenario. 

OK, I was thinking it may not take into account amounts withdrawn earlier, so long as the total didn;t exceed the old lump sum allowance. eg If I withdrew £150k ahead of time, they wouldn't be asking me to pay tax onthe extra £50k.

But I can see how what I thought would be impractical and difficult to implement, and a new total could apply to past and future lump sums.

To answer the earlier question - yes, the reduction would affect me.

dunstonh

OK, I was thinking it may not take into account amounts withdrawn earlier, so long as the total didn;t exceed the old lump sum allowance.

There has been a cap on tax free cash since 2006.   So, no, that would not work for you.

But I can see how what I thought would be impractical and difficult to implement, and a new total could apply to past and future lump sums.

Just as it does at the moment.