Pension drawdown question

Bloo

Just wanted someone to confirm my understanding of how this works is correct if possible?

Short summary:
M63, taken early retirement, not paying anything more into an Aviva personal pension. Current fund value is £77k, taking £500 per month drawdown. This keeps my total (with other pensions) income which I live off below the £12,570 limit so I currently don't pay tax. Projection from Aviva is that this fund will run out when I'm 76.

The issue is I don't get state pension yet, and also will inherit £200k plus in the next year or two. I presume I could increase my monthly drawdown to say £1k and I would just pay 20% tax on the income above £12,570? Are there any other taxes to pay?

Also, am I able to withdraw any amount from the fund as long as I pay the approriate tax?

Thanks

DE_612183

Depending on the scheme yes - have you also factored in your 25% tax free element?

jaypers

Hi. The tax works in exactly the same way as PAYE from employment. Only exception is that you don’t pay NI. If you vary the income through the year, well worth updating your annual income estimate via your Govt Gateway Portal on the HMRC website. 

Bloo

Yes I have, thanks

Essentially I'm trying to bridge the gap until my income is increased by the inheritance. I'm using the pension as a stop-gap, more like a savings a/c. State pension is due in 4 years

Any idea how I would go about it? Is it as simple as contact Aviva then tell the taxman about my increased income?

Thanks

Linton

1) Your State Pension will be taxable and will leave very little, if anything, available from your tax allowance. So, assuming you get a full SP, most or all your other income will be taxed at 20% in 4 years time

2) If you increase your total income beyond £12570 you will pay 20% on the excess. From what you have said there will be no other taxes to pay.

3) There are no limits as to how much you can draw down at any one time.

4) £6K/year drawdown, increasing with inflation, is extremely unlikely to be sustainable over your lifetime.  How unsustainable rather depends on what on what funds you are holding in your pension. The running out estimate at 76 is reasonable for planning purposes.

Albermarle

Bloo said:

Yes I have, thanks

Essentially I'm trying to bridge the gap until my income is increased by the inheritance. I'm using the pension as a stop-gap, more like a savings a/c. State pension is due in 4 years

Any idea how I would go about it? Is it as simple as contact Aviva then tell the taxman about my increased income?

Thanks

If you want Aviva to increase your monthly payment, then just ask them.
When calculating if to take any tax or not, they will use the tax code issued to them previously by HMRC.
What will happen is dependent on how your £12570 allowance is allocated to Aviva and your other pension.
You can see this on your on line personal tax account.

Bloo

Linton said:

1) Your State Pension will be taxable and will leave very little, if anything, available from your tax allowance. So, assuming you get a full SP, most or all your other income will be taxed at 20% in 4 years time

4) £6K/year drawdown, increasing with inflation, is extremely unlikely to be sustainable over your lifetime.  How unsustainable rather depends on what on what funds you are holding in your pension. The running out estimate at 76 is reasonable for planning purposes.

Yes, could do with the basic allowance being increased please Mrs Reeves!

I've always planned that my inheritance would be more than the pension (which I started in the 80s)

Appreciate your advice, thanks