Can you still work full time after drawing NEST pension out?

faringdon

Hi,
The NEST website says i can draw out my pension now, since i am over 55 (i am 56).
However, doesnt that then mean that i am "retired" for tax purposes, and so cannot keep on working full-time?

Marcon

faringdon said:

Hi,
The NEST website says i can draw out my pension now, since i am over 55 (i am 56).
However, doesnt that then mean that i am "retired" for tax purposes, and so cannot keep on working full-time?

No. There's no longer any connection - at least technically! - between drawing a pension and being retired. You can work for as long as you like after starting to take your pension benefits.

Dazed_and_C0nfused

faringdon said:

Hi,
The NEST website says i can draw out my pension now, since i am over 55 (i am 56).
However, doesnt that then mean that i am "retired" for tax purposes, and so cannot keep on working full-time?

No, it doesn't mean that.

But if you take taxable pension income from Nest, not just a TFLS, you will be forever limited to contributions of £10k/year into defined contribution schemes like Nest.

It wouldn't have any impact on any defined benefit schemes you are contributing to.

Sarahspangles

No, but there are two consequences to be aware of:

If you take taxable pension payments from a defined contribution pension like NEST then you are capped as to the amount you can contribute to a pension from that point, to £10k per annum, which is still sufficient for many people.  You aren't affected if you only take the 25% tax free lump sum (TFLS)

If you keep working and your pension + salary takes you above the limit, you could pay higher rate tax

There are some employer/scheme specific issues such as them closing the pension to you (and losing employer contributions), but you'd need to look at your scheme details to know if those apply.

Brie

If NEST is the pension provider for your current employment will your employer let you continue to participate in the scheme?  Do you want to lose out on their contributions?

Albermarle

You need to check the questions posed above as well as this one.

If you start taking your pension now, what are you going to live off when you stop working. There are two common mistakes with pensions;
1) Underestimating how big a pot you need to retire reasonable comfortably.
2) Underestimating how long you live live. At Age 56 you have a pretty good chance of reaching 90.

faringdon

Thankyou all very much.
I have some £8000 in my NEST pension....so is it the case that if i take this out now (age 56), then i will be charged tax on it?
25% of it ((£2000) would not be taxed?.....but the other 75% (£6000) would be taxed at 25%?......ie, i would only be payed  £2000 + £4500 = £6500?

...though the withdrawn pension in fact  gets added to my pay (which is £54k per annum), and if it takes me into a new tax bracket then i get taxed more than 25%?

...OR....the pension and my yearly salary gets added together..and then tax is calculated on that?

Marcon

faringdon said:

Thankyou all very much.
I have some £8000 in my NEST pension....so is it the case that if i take this out now (age 56), then i will be charged tax on it?
25% of it ((£2000) would not be taxed?.....but the other 75% (£6000) would be taxed at 25%?......ie, i would only be payed  £2000 + £4500 = £6500?

...though the withdrawn pension in fact  gets added to my pay (which is £54k per annum), and if it takes me into a new tax bracket then i get taxed more than 25%?

...OR....the pension and my yearly salary gets added together..and then tax is calculated on that?

25% is tax free.

The rest is added to your other taxable income for the tax year in which you withdraw it, and you pay tax at the appropriate rate on your whole taxable income.

Dazed_and_C0nfused

faringdon said:

Thankyou all very much.
I have some £8000 in my NEST pension....so is it the case that if i take this out now (age 56), then i will be charged tax on it?
25% of it ((£2000) would not be taxed?.....but the other 75% (£6000) would be taxed at 25%?......ie, i would only be payed  £2000 + £4500 = £6500?

...though the withdrawn pension in fact  gets added to my pay (which is £54k per annum), and if it takes me into a new tax bracket then i get taxed more than 25%?

...OR....the pension and my yearly salary gets added together..and then tax is calculated on that?

Not even Scotland has a 25% tax rate!

The £6,000 that is taxable will ultimately be added to your other taxable income of the tax year you take the pension income and taxed accordingly.  This might be 20%.  Or 40%.  Or some taxed at 20% and some at 40%.

But based on what you've posted probably 40%.

So your £8,000 is only going to give you £5,600 after tax.

Aretnap

Indeed, if you draw it out while you are already a higher rate taxpayers you are basically choosing to give nearly a third of it to the taxman. That would certainly be very public spirited of you. However unless you expect to be a higher rate taxpayers for the rest of your life, including in retirement, you could reduce the amount of tax you have to pay significantly, and possibly even to zero, by waiting until you stop working before you withdraw it. 

GunJack

Am I right in thinking, at your age and salary, that this nest pension isn't the only pension you have??? If it is, think I'd be looking at putting way more in and not about taking it out ....