Combining company pensions

El_Torro

You don't have to take the 25% tax free in one lump sum. Instead you can make regular withdrawals and 25% of that withdrawal will be tax free. So with a Personal Allowance of £12,570 you can withdraw £16,760 in a tax year and not pay tax on any of it. Assuming you have no other income in that tax year. 

Albermarle

El_Torro said:

You don't have to take the 25% tax free in one lump sum. Instead you can make regular withdrawals and 25% of that withdrawal will be tax free. So with a Personal Allowance of £12,570 you can withdraw £16,760 in a tax year and not pay tax on any of it. Assuming you have no other income in that tax year. 

OP- Quite a number of people use the above way of taking out money from their pension, when they have no other taxable income. ( often prior to receiving a DB pension and/or the state pension)
It is called a UFPLS payment, where exactly 25% is tax free and 75% taxable. By fixing the amounts as in the above post, you pay no tax as you are fully utilising your personal tax allowance each tax year.

dont_use_vistaprint

Thanks for the info above..

This makes sense if I were to withdraw each year my personal allowance and some/  all of my 25% tax free, but if I wanted to withdraw less than that, I’m not sure I understand or it does not seem possible to keep the 25% tax free allowance for later years and just utilise my personal allowance  as suggested above on another post

I’m still a little bit confused because having just spoken to one of the pension providers they have confirmed that withdrawals will apply the 25% tax free allowance automatically and it appears , but a bit unclear again ! the remainder that they put in the draw down pot will be automatically taxed without considering my personal allowance when accessed. 

If this is the case, then I’d have to do a tax return to claim tax back  any tax paid on the unused personal allowance.

think I’m slightly more confused now  than before I posted :-)

MallyGirl

Hi

I think you need to do a bit of reading.
You can just take the 25% tax free and the remaining 75% goes into a drawdown pot where it will be termed 'crystallised'
or
You can take slices out where 25% of each slice is tax free and 75% is taxable. Taking a £16,760 slice would maximise the amount of taxable income that is at 0% tax rate.

No need to do a tax return. Once you take your first income, by any method, then HMRC will issue a tax code.

Albermarle

dont_use_vistaprint said:

Thanks for the info above..

This makes sense if I were to withdraw each year my personal allowance and some/  all of my 25% tax free, but if I wanted to withdraw less than that, I’m not sure I understand or it does not seem possible to keep the 25% tax free allowance for later years and just utilise my personal allowance  as suggested above on another post.
You can not take just taxable income without first ( or at the same time) taking some tax free. So if you want to take out £12570 of taxable income, you have to take a minimum amount of tax free at the same time ( one third of the taxable) 

I’m still a little bit confused because having just spoken to one of the pension providers they have confirmed that withdrawals will apply the 25% tax free allowance automatically and it appears , but a bit unclear again ! the remainder that they put in the draw down pot will be automatically taxed without considering my personal allowance when accessed. 
The pension provider has no idea of your tax position or tax code, especially if you take only irregular payments. So they tax you anyway and you just have to claim it back via a form.

If this is the case, then I’d have to do a tax return to claim tax back  any tax paid on the unused personal allowance.

think I’m slightly more confused now  than before I posted :-)

See comments in bold.

Have you had a free chat with PensionWise?
Pension Wise: free pension guidance | MoneyHelper

dont_use_vistaprint

Albermarle said:

dont_use_vistaprint said:

Thanks for the info above..

This makes sense if I were to withdraw each year my personal allowance and some/  all of my 25% tax free, but if I wanted to withdraw less than that, I’m not sure I understand or it does not seem possible to keep the 25% tax free allowance for later years and just utilise my personal allowance  as suggested above on another post.
You can not take just taxable income without first ( or at the same time) taking some tax free. So if you want to take out £12570 of taxable income, you have to take a minimum amount of tax free at the same time ( one third of the taxable) 

I’m still a little bit confused because having just spoken to one of the pension providers they have confirmed that withdrawals will apply the 25% tax free allowance automatically and it appears , but a bit unclear again ! the remainder that they put in the draw down pot will be automatically taxed without considering my personal allowance when accessed. 
The pension provider has no idea of your tax position or tax code, especially if you take only irregular payments. So they tax you anyway and you just have to claim it back via a form.

If this is the case, then I’d have to do a tax return to claim tax back  any tax paid on the unused personal allowance.

think I’m slightly more confused now  than before I posted :-)

See comments in bold.

Have you had a free chat with PensionWise?
Pension Wise: free pension guidance | MoneyHelper

Thanks for this , more clear now. I did wonder if I’d have to claim it or pay it by SA  the following year or if they taxed like an employer does using your tax code

Not yet  I’m going to have the free call once I’m back in the UK

Silvertabby

dont_use_vistaprint said:

Silvertabby said:

dont_use_vistaprint said:

They are not that old Aviva has an app it’s about 7 years old and the other is Aegon about 12 years old. 

I spoke to them both and they confirmed I can access the money in just over a year. They will write to me in about eight months with the information but it seems that every pound I take out they will place £3 into a drawdown pot, which will be invested in exactly exactly the same way as the remaining money left in the pension. Anything I take out of the drawdown pot would be counted on my tax return.

The only other pension I have is an old LGPS that I cannot access until 65 so currently just living on savings

Exactly how old is your LGPS pension?  Do you have any R85/early payment protections?  

It ended in 2013 I have around 12 years contributions so it’s not a lot, not aware of any R85/early payment protections

As you joined before 1 October 2006, you may have R85 protections in respect of your pre April 2008 service.  ie, if taken at age 60 and as long as your service (including deferred service) is 25 years, then your pre 2008 benefits wouldn't be reduced for early payment.  But your benefits from 1 April 2008 onwards would be reduced if taken before age 65.

Rather than wait until 65, you could ask for an estimate at 60, and see if it's worth taking then subject to the total payment reductions. 

Albermarle

dont_use_vistaprint said:

Albermarle said:

dont_use_vistaprint said:

Thanks for the info above..

This makes sense if I were to withdraw each year my personal allowance and some/  all of my 25% tax free, but if I wanted to withdraw less than that, I’m not sure I understand or it does not seem possible to keep the 25% tax free allowance for later years and just utilise my personal allowance  as suggested above on another post.
You can not take just taxable income without first ( or at the same time) taking some tax free. So if you want to take out £12570 of taxable income, you have to take a minimum amount of tax free at the same time ( one third of the taxable) 

I’m still a little bit confused because having just spoken to one of the pension providers they have confirmed that withdrawals will apply the 25% tax free allowance automatically and it appears , but a bit unclear again ! the remainder that they put in the draw down pot will be automatically taxed without considering my personal allowance when accessed. 
The pension provider has no idea of your tax position or tax code, especially if you take only irregular payments. So they tax you anyway and you just have to claim it back via a form.

If this is the case, then I’d have to do a tax return to claim tax back  any tax paid on the unused personal allowance.

think I’m slightly more confused now  than before I posted :-)

See comments in bold.

Have you had a free chat with PensionWise?
Pension Wise: free pension guidance | MoneyHelper

Thanks for this , more clear now. I did wonder if I’d have to claim it or pay it by SA  the following year or if they taxed like an employer does using your tax code

Not yet  I’m going to have the free call once I’m back in the UK

If you were taking a regular monthly income from a pension provider, then they would tax you just like an employer would and they would have a tax code set by HMRC.
The issue is usually when you just take a one off payment, say once a year.

dont_use_vistaprint

MallyGirl said:

Hi

I think you need to do a bit of reading.
You can just take the 25% tax free and the remaining 75% goes into a drawdown pot where it will be termed 'crystallised'
or
You can take slices out where 25% of each slice is tax free and 75% is taxable. Taking a £16,760 slice would maximise the amount of taxable income that is at 0% tax rate.

No need to do a tax return. Once you take your first income, by any method, then HMRC will issue a tax code.

Thanks I’ve tried reading / researching but none of the articles seem to explain it in any detail, how the tax applies , they just repeat the same lines


for example I’ve found nothing online mentioning the 16,760 amount to maximise tax free amount's or anything explaining when and how tax is deducted or any details of drawing from the taxable and non taxable pots other than saying you can take all the 25% or some of it 

Dazed_and_C0nfused

dont_use_vistaprint said:

MallyGirl said:

Hi

I think you need to do a bit of reading.
You can just take the 25% tax free and the remaining 75% goes into a drawdown pot where it will be termed 'crystallised'
or
You can take slices out where 25% of each slice is tax free and 75% is taxable. Taking a £16,760 slice would maximise the amount of taxable income that is at 0% tax rate.

No need to do a tax return. Once you take your first income, by any method, then HMRC will issue a tax code.

Thanks I’ve tried reading / researching but none of the articles seem to explain it in any detail, how the tax applies , they just repeat the same lines


for example I’ve found nothing online mentioning the 16,760 amount to maximise tax free amount's or anything explaining when and how tax is deducted or any details of drawing from the taxable and non taxable pots other than saying you can take all the 25% or some of it 

That's probably because it isn't £16,760 that's "tax free".

But it is mentioned in some places, look at the example of Ann here,

https://techzone.abrdn.com/public/pensions/Practical-guide-using-drawdown

It's £4,190 that is tax free.  And £12,570 that is taxable pension income.  But if you don't have any other non savings non dividend income in the same tax year then there would be no tax payable on the £12,570 as you have your Personal Allowance available.

If you have applied for Marriage Allowance then the £16,760 figure is only £15,080 due to your reduced Personal Allowance.