25% tax free

edwardsk

My husband is 56 and has his pension with Nest he asked to take his 25% tax free out of the pension which his employer is still paying into.  They said if he did this they would then close the account and he would have to find a provider elsewhere but he can’t do this as his employer is paying into to it. So he has had to take money out and get taxed on it. How is Next allowed to refuse the 25% tax free.  The web page says he can do this but the operator and the calculator on the site say no.  Why can’t this provider let you do this?

Dazed_and_C0nfused

edwardsk said:

My husband is 56 and has his pension with Nest he asked to take his 25% tax free out of the pension which his employer is still paying into.  They said if he did this they would then close the account and he would have to find a provider elsewhere but he can’t do this as his employer is paying into to it. So he has had to take money out and get taxed on it. How is Next allowed to refuse the 25% tax free.  The web page says he can do this but the operator and the calculator on the site say no.  Why can’t this provider let you do this?

Did he ask about making a partial transfer to another provider and then letting the Nest pension continue to build up?

I presume he realises he has triggered the Money Purchase Annual Allowance?

Albermarle

edwardsk said:

My husband is 56 and has his pension with Nest he asked to take his 25% tax free out of the pension which his employer is still paying into.  They said if he did this they would then close the account and he would have to find a provider elsewhere but he can’t do this as his employer is paying into to it. So he has had to take money out and get taxed on it. How is Next allowed to refuse the 25% tax free.  The web page says he can do this but the operator and the calculator on the site say no.  Why can’t this provider let you do this?

Some workplace pensions do not allow withdrawals, if you are still working and contributing. Not sure why but it seems to be the case.

However there is no logic in that Nest will not allow him to take the tax free, but will allow him to take taxable income.
In fact it is actually impossible to take taxable income without taking some tax free.
So presumably he did  get some tax free cash cash along with the taxable ?

Maybe the issue was that he wanted to take all the tax free and crystallise the whole amount.

dunstonh

They said if he did this they would then close the account and he would have to find a provider elsewhere but he can’t do this as his employer is paying into to it. 

As it says on the Nest website:

 So he has had to take money out and get taxed on it.

He didn't have to do that.  He chose to do that.  

How is Next allowed to refuse the 25% tax free.  

They didn't.     They refused flexi-access drawdown as they don't offer it.

 The web page says he can do this but the operator and the calculator on the site say no.  

Yes, he could do it.  Just not with Nest.

Why can’t this provider let you do this?

Legacy schemes, stakeholder pensions and basic schemes often don't allow flexi-access drawdown.

QrizB

edwardsk said:

So he has had to take money out and get taxed on it.

Has he actually done this, or are you asking about it in advance?

The time to look for advice is usually before doing something, not afterwards.

edwardsk

The information given by them does not reflect how it is actioned.  He went ahead with it but there was no choice as I explained 

german_keeper

As mentioned above NEST does not allow FAD. But they do accept requests for occasional lump sums, maximun 1 per month. My wife takes £1,256 out of her NEST pension every month, which is the most she can get without paying any tax; 25% is tax free, 75% is taxable. Partway through the process it confirms that £313 is tax free, £943 is taxable. No tax is taken however because the taxable amount is within her Personal Tax Allowance.

I suspect this is what your husband did. Did he make a note of the tax free/taxable breakdown when it was displayed? The taxable amount will then be taxed at the appropriate rate. So for example if he has other taxable income above his PTA (standard is £12,570 but it can be different) then 25% of the amount requested will be tax free and 75% taxed at 20% or 40% or a combination of both, depending on how much other taxable income he has. If you live in Scotland these % figures are slightly different. Does the amount requested and received fit in with this?

Aylesbury_Duck

edwardsk said:

The information given by them does not reflect how it is actioned.  He went ahead with it but there was no choice as I explained 

There was a choice, as dunstonh has explained, further up the thread.

MallyGirl

Dazed_and_C0nfused said:

edwardsk said:

My husband is 56 and has his pension with Nest he asked to take his 25% tax free out of the pension which his employer is still paying into.  They said if he did this they would then close the account and he would have to find a provider elsewhere but he can’t do this as his employer is paying into to it. So he has had to take money out and get taxed on it. How is Next allowed to refuse the 25% tax free.  The web page says he can do this but the operator and the calculator on the site say no.  Why can’t this provider let you do this?

Did he ask about making a partial transfer to another provider and then letting the Nest pension continue to build up?

I presume he realises he has triggered the Money Purchase Annual Allowance?

The question about MPAA is important. Does he realise that by doing this he has limited future pension contributions to £10k pa