Most tax efficient way to withdraw money from all pensions pots

gm0

https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/taking-your-whole-pension-in-one-go

Link / google "small pots / small lump sum rules" as it may interest you.  There are special arrangements to extinguish tiny pots below 15k.  The pot is emptied. 25% tax free.  The rest is in year taxable for income.  You could do them as is.  Nothing stopping you transferring and merging a few together still below 15k if you want or need a provider that does this vs some old scheme.  Partial consolidation.  Allowed 3 small pots.

Small pots don't stop you saving - MPAA the moneypurchaseannual allowance is not triggered by a small pot.
It is generally triggered by taking a pension income from any pot.  Which is money beyond TFC. So extinguishing a pot will trigger it outside the special rules. Nor do small pots interact with lumpsum allowances. 

If you might work again and conceivably earn enough for it to matter (Employer plus employee contribution limit is 10k pa on MPAA - much higher without it).

If MPAA doesn't matter - definitively. Not working and saving a pension again.  Then mucking around with small pots may not be worth it - for you.  Entirely your choice.

If in full retirement and finished with saving - they are frankly less of a concern. 

The non-earnings limit remains available save 2880 in a pension get 3600 (tax relief) to all.

As to "income tax" treatment beyond TFC it is basically the same.  In year self assessment


So to the questions

Any separate pot can be taken at your discretion in a given tax year.  When the income lands defines. Bad idea to muck around in March at tax year end.  Pension admin is not great. Don't risk it happening in the wrong year or early by mistake if aiming for April.  It happens.

Allowances to tax free cash are per value of pot. 25% of what is in it. 

Allowance can't be shifted - taken from a different one.   No making Pot A more taxable and having more TFC from Pot B.  Not allowed.

Yes - income in a tax year tax free is limited by the SA income tax allowances and any budget changes.

But basically yes.  If you take pension income.  Have no other income. No savings above that interest allowance. No dividends from self employment.  Nothing else.  Then the zero rated band for each year is ALL available for the pensions income (tested against the sum of the 75% of any pots you take in that year - ignoring the 25% tfc)

Hence the 16k observation upthread.

If still below - then no tax would be paid.

Touching a DC doesn't mean you have to touch the DB.  Separate decision.

Often it is best - if you can - to take the DB at the "normal retirement age" not early - so that the pension is not reduced via the scheme rules - for being taken for longer.  More years = start with less. 

You do need to understand the DB pension - for your exact membership dates and scheme.  It may have a lumpsum option which obviously reduces the subsequent pension.  And an option not to do that which keeps it higher. 

The real value in the DB pension may be the fact it is inflation indexed in some way.  Until you take it. And when you do until you and a partner/spouse receiving a portion of it also dies. 

This is REALLY important to get clear about the specific scheme rules and amounts.
Before making a bad trade.  Some money now. But reducing or foregoing a chunk of all of that over many years

singhini

@gm0 thanks, some really good stuff. 

i think the DB pension is index linked (its from around 2001 till 2007 when working in pharmaceuticals / chemicals). 
i have always thought due to my personal circumstances my DB pension was rubbish (its only got 7 years of service and the final salary was about £40,000 and the calculation figure is 1/80th i think, not sure). Either way its not alot of money each year £4,500 IMHO (sometimes i think transferring the lot out to a SIPP might be better hence my original post #1 in the thread).

i will be / am one of those people who "Have no other income. No savings above that interest allowance. No dividends from self employment.  Nothing else".

HappyHarry

singhini said:

At 65 i will receive full state pension so i need to start access my funds

You might want to check that age. I would suggest you will be 67 before you can access your state pension.

https://www.gov.uk/state-pension-age

eastcorkram

singhini said:

At 65 i will receive full state pension so i need to start access my funds

I'm already 65, and I don't get state pension until I'm 66. 

Cobbler_tone

artyboy said:

Hoenir said:

Cobbler_tone said:

You can take 25% of DB (tax free)

Are you sure that is statement is factually correct. 

I think we know that it isn't...

DB schemes each have their own rules that may or may not allow a tax free lump sum to be taken on commencement. But as there is no 'pot', the notion of it being any percentage is effectively meaningless - it simply represents a trade off with a reduction in monthly payments as a result.

"You can take 25% of 'my' DB (tax free) but the pension will also kick in…or leave it alone until you need it. Just make sure you check the scheme rules."

Better? The most important bit being "Just make sure you check the scheme rules."  

To really throw the cat amongst the pigeons...in my DB scheme the CETV value is also referred to as a 'pot'.   
Although the CETV won't have a direct correlation to the tax free lump sum, if an option. No issues with a CETV being referred to as a 'pot' at all, in fact I can't think of a better term.

I think the important thing is that the OP now realises that they need to consider their DB pension differently to their numerous DC ones.

Some real pedants.

LHW99

(sometimes i think transferring the lot out to a SIPP might be better hence my original post #1 in the thread)

You would need to pay for specialised advice, which would be costly, and the answer would probably be that you are advised not to do it (the advice still has to be paid for).

Trying to transfer would then become much more difficult.

dunstonh

singhini said:

i think the DB pension is index linked (its from around 2001 till 2007 when working in pharmaceuticals / chemicals). 
i have always thought due to my personal circumstances my DB pension was rubbish (its only got 7 years of service and the final salary was about £40,000 and the calculation figure is 1/80th i think, not sure). Either way its not alot of money each year £4,500 IMHO (sometimes i think transferring the lot out to a SIPP might be better hence my original post #1 in the thread).

i will be / am one of those people who "Have no other income. No savings above that interest allowance. No dividends from self employment.  Nothing else".

DB transfers are suitable in around 1 in 10 cases.  9 in 10 would be unsuitable.   Why do you think you would be that 1 in 10?

Hoenir

singhini said:

 Either way its not alot of money each year £4,500 IMHO (sometimes i think transferring the lot out to a SIPP might be better hence my original post #1 in the thread).

When did you last obtain the CETV ?  Bond markets are rapidly moving. Sending the CETV lower. 

In more broader terms. Don't underestimate the value of a guaranteed rising income source. Equity markets aren't always benign and on an upward trajectory. Likely to become far more volatile in 2025. 

jimjames

singhini said:

i will be / am one of those people who "Have no other income. No savings above that interest allowance. No dividends from self employment.  Nothing else".

I don't understand this. You've outlined multiple pensions and savings of £180k that would generate £9k pa of interest so what does the no other income refer to?

DRS1

jimjames said:

singhini said:

i will be / am one of those people who "Have no other income. No savings above that interest allowance. No dividends from self employment.  Nothing else".

I don't understand this. You've outlined multiple pensions and savings of £180k that would generate £9k pa of interest so what does the no other income refer to?

Well hopefully all or most of the £180k is in ISAs.