Which pension lump sum?

Whiterose23

Secret2ndAccount said:

The 40% tax threshold is 50k
You are paying into your DC (you personally, not your employer) 2k (I'm guessing)
That increases the 40% threshold for you to 52k
You earn 38k.   So you have 14k before you get to 40% tax.
Take the 15k tax free lump sum from the DC. That is 100% outside of tax and doesn't count at all for tax
Take 14k from the taxable part of the DC. 38k (income) + 14k (pension) = 52k which is your limit before 40% tax
So you pay 20% tax on the 14k. That's 3k tax, leaving 11k.
Now you have 15k + 11k = 26k for moving costs.
Take any more out of the pension before April and it will be taxed at 40%. So if you need 3k more, you will have to take 5k out of the pension.
If you wait until after April 6th, then you will be able to take another 14k out at 20% tax, assuming you don't have a pay rise. Or, if you needed 3k you would only have to take out 3,750 instead of the 5k above

I haven't seen a full financial questionnaire from you, but the above numbers are good for a typical person in England.

When you make your first pension withdrawals the tax might be calculated incorrectly. You can get in touch with HMRC to sort it, or wait until the end of the tax year when they will eventually sort it for you.
Apart from the tax free lump sums, all future pension including State Pension will be treated as income, and taxed accordingly, but no National Insurance.
If you retire at State Pension age, the SP roughly uses up your tax free allowance, so you are going to pay 20% tax on some of your pension income sooner or later

Thank you! That makes sense to me. So as long as I don’t exceed the annual income of £50k a year, the extra I take from the DC pension above and beyond the TFLS will be taxed at 20%.
And the upshot of this is that it may still be worth doing this rather than touching the DB pensions, as I will get more money back from them over the long term.

FIREDreamer

Whiterose23 said:

Secret2ndAccount said:

The 40% tax threshold is 50k
You are paying into your DC (you personally, not your employer) 2k (I'm guessing)
That increases the 40% threshold for you to 52k
You earn 38k.   So you have 14k before you get to 40% tax.
Take the 15k tax free lump sum from the DC. That is 100% outside of tax and doesn't count at all for tax
Take 14k from the taxable part of the DC. 38k (income) + 14k (pension) = 52k which is your limit before 40% tax
So you pay 20% tax on the 14k. That's 3k tax, leaving 11k.
Now you have 15k + 11k = 26k for moving costs.
Take any more out of the pension before April and it will be taxed at 40%. So if you need 3k more, you will have to take 5k out of the pension.
If you wait until after April 6th, then you will be able to take another 14k out at 20% tax, assuming you don't have a pay rise. Or, if you needed 3k you would only have to take out 3,750 instead of the 5k above

I haven't seen a full financial questionnaire from you, but the above numbers are good for a typical person in England.

When you make your first pension withdrawals the tax might be calculated incorrectly. You can get in touch with HMRC to sort it, or wait until the end of the tax year when they will eventually sort it for you.
Apart from the tax free lump sums, all future pension including State Pension will be treated as income, and taxed accordingly, but no National Insurance.
If you retire at State Pension age, the SP roughly uses up your tax free allowance, so you are going to pay 20% tax on some of your pension income sooner or later

Thank you! That makes sense to me. So as long as I don’t exceed the annual income of £50k a year, the extra I take from the DC pension above and beyond the TFLS will be taxed at 20%.
And the upshot of this is that it may still be worth doing this rather than touching the DB pensions, as I will get more money back from them over the long term.

Presumably invoking the MPAA of £10,000 isn’t an issue for you?

Whiterose23

FIREDreamer said:

Whiterose23 said:

Secret2ndAccount said:

The 40% tax threshold is 50k
You are paying into your DC (you personally, not your employer) 2k (I'm guessing)
That increases the 40% threshold for you to 52k
You earn 38k.   So you have 14k before you get to 40% tax.
Take the 15k tax free lump sum from the DC. That is 100% outside of tax and doesn't count at all for tax
Take 14k from the taxable part of the DC. 38k (income) + 14k (pension) = 52k which is your limit before 40% tax
So you pay 20% tax on the 14k. That's 3k tax, leaving 11k.
Now you have 15k + 11k = 26k for moving costs.
Take any more out of the pension before April and it will be taxed at 40%. So if you need 3k more, you will have to take 5k out of the pension.
If you wait until after April 6th, then you will be able to take another 14k out at 20% tax, assuming you don't have a pay rise. Or, if you needed 3k you would only have to take out 3,750 instead of the 5k above

I haven't seen a full financial questionnaire from you, but the above numbers are good for a typical person in England.

When you make your first pension withdrawals the tax might be calculated incorrectly. You can get in touch with HMRC to sort it, or wait until the end of the tax year when they will eventually sort it for you.
Apart from the tax free lump sums, all future pension including State Pension will be treated as income, and taxed accordingly, but no National Insurance.
If you retire at State Pension age, the SP roughly uses up your tax free allowance, so you are going to pay 20% tax on some of your pension income sooner or later

Thank you! That makes sense to me. So as long as I don’t exceed the annual income of £50k a year, the extra I take from the DC pension above and beyond the TFLS will be taxed at 20%.
And the upshot of this is that it may still be worth doing this rather than touching the DB pensions, as I will get more money back from them over the long term.

Presumably invoking the MPAA of £10,000 isn’t an issue for you?

No not at all 😊 I’m not the norm for these boards when it comes to amount of pension savings.