Pension Pot question.

Stevej60

Hi Folks,called my pension provider regarding one of two pensions they hold.The original retirement date was 15/2/2025 for these policies.They tell me that Standard life as a third party handles it after that date and that I am entitled to 25% tax free but that any withdrawls going forward will incur tax.as this policy is taxable in effect a drawdown pension.I had a session with pensionwise where this option was mentioned I had hoped to take it as a lump sum next year on
my new retirement date it's not a lifechanging amount so if it's taxable so be it just wondered if this sounds right.I have been told to ring back after the 15th as it is at present an MVA period?

molerat

That is the norm, 25% is tax free and the remaining 75% taxable however you take it.  If you take the 25% up front then anything you later take from the remaining 75%, including any gains, is taxable.

Stevej60

molerat said:

That is the norm, 25% is tax free and the remaining 75% taxable however you take it.  If you take the 25% up front then anything you later take from the remaining 75%, including any gains, is taxable.

Thanks Molerat,I mistakenly thought if I left it till 66 it would be tax free after official retirement.

MallyGirl

Pension income is taxable but how much tax you pay depends upon your other income. If you aren't working then the first £12k incurs no tax - but if you are a 40% tax payer then that is likely what you will pay on the 75% taxable bit. You don't have to take it all in one go so you might be able to spread it out and minimise tax

Dazed_and_C0nfused

MallyGirl said:

Pension income is taxable but how much tax you pay depends upon your other income. If you aren't working then the first £12k incurs no tax - but if you are a 40% tax payer then that is likely what you will pay on the 75% taxable bit. You don't have to take it all in one go so you might be able to spread it out and minimise tax

That does depend on any other taxable income, not necessarily from working, and also what your Personal Allowance is.

For someone who is married and not working it could easily be £11,310 rather than £12,570.

Stevej60

Thank you for your replies folk's,it was all down to me not understanding a thing about Pensions or how they work sadly in my head I'm still 21 and pensions seemed a long way off but here we are with a year to go before being an
official OAP.

LHW99

Stevej60 said:

Thank you for your replies folk's,it was all down to me not understanding a thing about Pensions or how they work sadly in my head I'm still 21 and pensions seemed a long way off but here we are with a year to go before being an
official OAP.

Aren't we all?

Albermarle

Stevej60 said:

molerat said:

That is the norm, 25% is tax free and the remaining 75% taxable however you take it.  If you take the 25% up front then anything you later take from the remaining 75%, including any gains, is taxable.

Thanks Molerat,I mistakenly thought if I left it till 66 it would be tax free after official retirement.

Remember also at 66 you will get your state pension which is also taxable.

THis Govt website could be useful for you.

Pensions and retirement | Help with pensions and retirement | MoneyHelper

Pat38493

Stevej60 said:

Hi Folks,called my pension provider regarding one of two pensions they hold.The original retirement date was 15/2/2025 for these policies.They tell me that Standard life as a third party handles it after that date and that I am entitled to 25% tax free but that any withdrawls going forward will incur tax.as this policy is taxable in effect a drawdown pension.I had a session with pensionwise where this option was mentioned I had hoped to take it as a lump sum next year on
my new retirement date it's not a lifechanging amount so if it's taxable so be it just wondered if this sounds right.I have been told to ring back after the 15th as it is at present an MVA period?

As others said, the 75% that is not atomatically tax free is taxable, but that doesn't necessarily mean you will actually pay tax - it depends on your situation in the tax year when you make the withdrawal.  Also you can spread the withdrawals across several years in order to pay less (or maybe zero) tax.