Cashing in pension.

Nichorj

Hello; I have a very small pension pot of 50k which I would like to cash in. My pension provider doesn't allow me to take the first 25% and then drawdown further; I would need to transfer to another provider; who offers a drawdown.  So if I cash the whole pension in with my current provider; after taking the initial tax free amount, I would be left with in excess of 30 k which I would pay emergency tax on. What is the most tax efficient way for me to do this? Should I move the whole amount into a drawdown facility?  I want the money to pay off my mortgage. Is it just the first withdrawal which is 25% tax free? I'm so confused. Any advice would be most welcome. With many thanks

DE_612183

yes first 25% is tax free - the rest then depends on your other income - if you have no other income you can use the £12,570 tax free allowance - but i'm guessing you do have other income.

Whether you take it now or later via Drawdown you'll be paying tax at the relevant rate depending on your other income.

What is your other income?

Nichorj

No I don't have any other income. I have no issue paying the tax; just trying to avoid paying emergency tax.

DE_612183

If you pay emergency tax - you just claim it back as a refund.

At the point when a pension provider make the payment they don't know what your tax situation is - hence the emergency tax code.

If you have no income - how can you pay a mortgage? ( and Live? )

molerat

There is no way to avoid paying emergency tax on the first dip, there are though ways of mitigating it but they all involve taking multiple payments with a final payment in March.

Marcon

Nichorj said:

No I don't have any other income. I have no issue paying the tax; just trying to avoid paying emergency tax.

Is this definitely a defined contribution scheme with no 'safeguarded benefits' (basically promises or guarantees such as a 'guaranteed annuity rate')?

comeandgo

DE_612183 said:

If you pay emergency tax - you just claim it back as a refund.

At the point when a pension provider make the payment they don't know what your tax situation is - hence the emergency tax code.

If you have no income - how can you pay a mortgage? ( and Live? )

Husband, wife, significant other?

Nichorj

Thank you for your replies. 

LHW99

Are you over 55? If not you mostly can't legally withdraw money from a pension (unless with very limited life expectancy)

If so, and you transferred to an HL SIPP (others are available) and leave it as cash, you could take half in one tax year and half in the next, so that if you do have no income you can set two separate year's personal allowances against it.

Nichorj

Yes thank you. I'm over 55. That's exactly what I was thinking.