SIPP LUMP SUM AFTER ALREADY TAKING 25% TAX FREE

JohnF71

As title states 

I have already taken 25% over a year ago to pay off mortgage 

both my wife and I have a combined £350K Remaining which we would like to take a £100K lump sum

is it advised? 
What are the tax implications?
both of us work FT at present 

JohnF71

I have already taken 25% tax free but I want to take another lump sum , is this advised or will it involve heavy tax 

Dazed_and_C0nfused

JohnF71 said:

As title states 

I have already taken 25% over a year ago to pay off mortgage 

both my wife and I have a combined £350K Remaining which we would like to take a £100K lump sum

is it advised? 
What are the tax implications?
both of us work FT at present 

Probably a lot of higher rate tax and possibly loss of Personal Allowance.

High Income Child Benefit Charge might come into play as well as reduced savings nil rate band (aka Personal Savings Allowance).

ali_bear

I think you may be better off borrowing 100k against your house and using your income and then pension income to gradually pay down the new mortgage. 

JohnF71

ali_bear said:

I think you may be better off borrowing 100k against your house and using your income and then pension income to gradually pay down the new mortgage. 

We have not taken any pension income so money just sitting there 

DE_612183

who is going to take the lump sum?

what are their projected earnings for 2025/26?

Albermarle

JohnF71 said:

As title states 

I have already taken 25% over a year ago to pay off mortgage 

both my wife and I have a combined £350K Remaining which we would like to take a £100K lump sum

is it advised? 
What are the tax implications?
both of us work FT at present 

Any money you ( or your wife) take from the pension will be added to your employment income, to calculate your tax liability. ( like if you had a second job) 
As you are working then this may mean you are pushed into the next tax bracket, so if you do withdraw some, you will need to calculate carefully and restrict how much you take to stop having to pay too much tax.
It will probably be better that the lower earner withdraws more than the higher earner, and both spread withdrawals over multiple tax years.

However the most obvious question, is what are you going to live on when you retire. In pension terms £350K between both of you is not that huge a sum. Of course you may have other savings etc.

Linton

You say £350K pension total. How is it split? 

Downsides:
1) Taxable drawdown is taxed as income in the year it was taken. So £50K each will almost certainly put you both into a higher tax band.
2) If you just withdraw even just 1p of taxable income your annual pension contribution allowance which covers both personal and employers contributions is reduced to £10K from the default £60K. This will limit your options to save a sizeable lump sum for retirement.
3) What will you live on in retirement?
4) Financially it could be a bad idea in that your mortgage interest could well be less than your average return on your investments, so you lose more than you gain.

For most people doing what you are proposing is probably foolish, though your circumstances may be different to "most people". So think it through very carefully.

Marcon

Have asked for this to be merged where you've posted the same question on the pensions board.

DE_612183

Depends - what other income have you got for the financial year?

For example if you have no income at all you can tale £12750 ( your personal allowance ) tax free.

If you already have about £53k income per year, and take £100k, then you get taxed at 40% so say bye bye to 40 grand.

Marcon

JohnF71 said:

As title states 

I have already taken 25% over a year ago to pay off mortgage 

both my wife and I have a combined £350K Remaining which we would like to take a £100K lump sum

is it advised? 
What are the tax implications?
both of us work FT at present 

People can give you pointers as to what you need to consider, but the idea that anyone can tell you if it's 'advised'  based on zero information is a lost cause, I'm afraid. Maybe it should be 'advised' - by an independent financial adviser who has a full understanding of your financial situation, age, attitude to risk etc etc.