Pension lump sum

tattybroon

Hi 
I’m new here so hopefully this question is in the correct forum page 
I’m retiring in April this year at 63. 

I want to use my 40k lump sum to top up my pension till I get state pension by taking a monthly amount out of it.
what would be best way to get a completely safe and efficient way of getting some interest out of lump sum but still be able to get monthly payment for next 4 years 
many thanks 

eskbanker

Obviously if you deplete £40K over four years then you'd be drawing down £10K a year, but if you put it into a savings account paying a few percent interest then that should increase annual drawdown by a few hundred quid:

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

Put the first year's money in an easy access account and then fix the rest for a year or more....

Albermarle

So for the next 2 or 3 tax years, you will have no taxable income?

If so then you should consider taking taxable income from your pension in those years of £12570, so you do not waste your personal tax allowance.
As you can not just take taxable income without taking tax free cash as well, the usual route is to take a UFPLS payment from your pension. This is 25% tax free and 75% taxable.
So if you take a UFPLS payment of £16760, this will include £4190 of tax free cash and £12570 of taxable income.
As this is within your personal allowance, you will not actually pay any tax.