25% tax free withdrawal at 55, do I still get taxed on remaining amount at retirement age

carman100

Hi all,

55 years old and I currently have two pension pots.

First pot is my original company stakeholder pension which hasn’t had contributions for a few years.

Second pot is current pension scheme from same company as above with monthly contributions.

I want to leave my bigger pot untouched but would like to take 25% from my first pot which I see is tax free.

Want to keep the remaining amount in the pot invested and use when I do retire which is 67. 

I’m confused on what happens to the remaining amount after the 25% with regard to tax. I know if I withdraw more than the 25% it starts to get taxed but will that also be correct at my retirement age of 67?

Thanks

Isthisforreal99

Taxable pension will always be taxable no matter when you access it.

Very wishful thinking!

bjorn_toby_wilde

Yes. The remaining 75% and any growth on that 75% will be taxed at your marginal rate as and when you take it.

Mark_d

I believe you get 25% of each pot tax-free.  But there may be other issues you face.  Do you know if you pensions are DB or DC?

Dazed_and_C0nfused

carman100 said:

Hi all,

55 years old and I currently have two pension pots.

First pot is my original company stakeholder pension which hasn’t had contributions for a few years.

Second pot is current pension scheme from same company as above with monthly contributions.

I want to leave my bigger pot untouched but would like to take 25% from my first pot which I see is tax free.

Want to keep the remaining amount in the pot invested and use when I do retire which is 67. 

I’m confused on what happens to the remaining amount after the 25% with regard to tax. I know if I withdraw more than the 25% it starts to get taxed but will that also be correct at my retirement age of 67?

Thanks

Not only will the remaining 75% be taxable income when you take it out of the pension but any growth on that 75% is also taxable income when you take it out of the pension.

QrizB

Mark_d said:

I believe you get 25% of each pot tax-free.  But there may be other issues you face.  Do you know if you pensions are DB or DC?

First post is a stakeholder pension, which is always DC.

Second pot (current one) is likely to be DC; not many companies close a DC scheme to start a DB one.

Albermarle

Your actual retirement age is not relevant.
If you take any money out of the 75% left it is classed as taxable income. 

carman100

Mark_d said:

I believe you get 25% of each pot tax-free.  But there may be other issues you face.  Do you know if you pensions are DB or DC?

Both are DC

carman100

Isthisforreal99 said:

Taxable pension will always be taxable no matter when you access it.

Very wishful thinking!

Ok, this explains my confusion. I incorrectly believed we stopped paying tax when drawing a pension.

Thanks

af1963

One way you might get part of the pension without paying tax on it, is if you stopped working before state pension age (so your income stopped) and started to draw the pension instead.  It would still be *taxable* income, but the first £12570 would (probably) be covered by your standard tax allowance, so you'd *pay* no tax on that part. 

As soon as your state pension starts, it's likely to use up the tax free allowance, so at that point, any other pension income will be fully taxed. 

Silvertabby

carman100 said:

Isthisforreal99 said:

Taxable pension will always be taxable no matter when you access it.

Very wishful thinking!

Ok, this explains my confusion. I incorrectly believed we stopped paying tax when drawing a pension.

Thanks

I think you mean NI, not tax.

You stop paying NI on your salary from SPA.  But you don't pay NI on pension income from any age.