Small lump sum at 55 but on UC

Scarlet_to_Black

Please could anyone advise? I have a small lump sum on Phoenix Life that I was going to cash in. I believe it’s about £480 tax free then remainder of approx £1800 is taxable. I receive £343 Universal Credit monthly. I’m 55 on 17 February so eligible to access it or transfer. 

Would anyone be able to advise my best option?  I have an NHS pension which will cover my retirement so planned to cash this small lump sum in until it occurred to me this is probably classed as income and I’ll probably lose out if I do take it?! 

Dazed_and_C0nfused

Scarlet_to_Black said:

Please could anyone advise? I have a small lump sum on Phoenix Life that I was going to cash in. I believe it’s about £480 tax free then remainder of approx £1800 is taxable. I receive £343 Universal Credit monthly. I’m 55 on 17 February so eligible to access it or transfer. 

Would anyone be able to advise my best option?  I have an NHS pension which will cover my retirement so planned to cash this small lump sum in until it occurred to me this is probably classed as income and I’ll probably lose out if I do take it?! 

What do you want to achieve?

If this pension has £2,280 in it then the TFLS would be £570 and taxable element £1,710.

You would pay some tax on that but if you weren't liable to tax overall then HMRC would refund the tax in due course (I'm assuming you don't need to file a tax return for any reason).

Scarlet_to_Black

I just wanted a little lump sum to enjoy as I don’t need to transfer it to my NHS pension. There is £1848.56. I can UFPLS or Commutation, the second of which has lump sum tax free element of £462.14 and taxable element £1386.42 subject to PAYE. 

I’m not concerned about the tax, but I am concerned that I’ll take the lump sum which will probably show as income in the month I receive it and will therefore probably lose all £342 of Universal Credit that month?. Which may mean I might as well transfer into my NHS pension if allowed or just leave where it is. 

I’m sorry but I have no clue about these things and my dad who knew his stuff on pensions is no longer with us 🥰