£52,000 Pension pot, I want to take all out and pay as little tax on it as possible

normandylife

Quite simply and without going into too much detail I am unlikely  to reach the 67 pension age, and if I do it will not be long after etc etc, like I said not worth going into.
I have been quite ill this year but right now I am OK ish and looking for a little more work, I am an electrician.
I have already taken my 25% from my pension pot and have a little savings tucked away. But I am looking at my pension pot and I am not going to wait until I  am 67 and it is then too late and if I do reach 67 getting  an annuity which will only be for a few years if not months, I want to spend it now.
Of course it will have to be taxed, but this year I have hardly worked and if I take say £12,000 each tax year and keep my earnings low I should save a little.

I just want any advice I can and what process do I need to follow, do I talk to the HM tax and revenue or my pension provider?

molerat

HMRC will simply react to money withdrawn, no need to do anything on that front.  You need to know the options available from the provider and simply withdraw what you need by whatever means they offer.  You need to understand that anything you draw will be taxable and at what rate depends on your other income also taking into account savings interest - if over £1K then the tax free interest can be reduced by other income.  Once the first withdrawal is taken, which will be taxed at 1257X, HMRC will issue a code to be used against future withdrawals.  So you need to decide if you want  lump sum or monthly income.

Albermarle

You need to talk to the pension provider,and/or have a good look around their website about withdrawal options.
Normally it should be straightforward just to request a payment of £12K or any other sum. It can be a problem if the pension is an older one.
You will most likely find that when you get the payment, it will have been taxed more than you expect, but you can claim back any overpaid tax relatively easily.
Alternatively you could set up a regular payment of £1000 a month.

SVaz

Are you a self employed sole trader?

normandylife

molerat said:

HMRC will simply react to money withdrawn, no need to do anything on that front.  You need to know the options available from the provider and simply withdraw what you need by whatever means they offer.  You need to understand that anything you draw will be taxable and at what rate depends on your other income also taking into account savings interest - if over £1K then the tax free interest can be reduced by other income.  Once the first withdrawal is taken, which will be taxed at 1257X, HMRC will issue a code to be used against future withdrawals.  So you need to decide if you want  lump sum or monthly income.

I basically want to take the full £52,000 as soon as possible but I know I cannot do it in 1 tax year without being hit by tax. The 2025 to 2026 tax year I am putting very little through my self assessment so it seems a good idea to make a start this year,

normandylife

SVaz said:

Are you a self employed sole trader?

Yes, 
And like I said previously, this year seems to be a good year to make a start 

normandylife

Albermarle said:

You need to talk to the pension provider,and/or have a good look around their website about withdrawal options.
Normally it should be straightforward just to request a payment of £12K or any other sum. It can be a problem if the pension is an older one.
You will most likely find that when you get the payment, it will have been taxed more than you expect, but you can claim back any overpaid tax relatively easily.
Alternatively you could set up a regular payment of £1000 a month.

I am quite uneducated when it comes to pensions to my shame(take note those that are young, the day will come ), but I have basically come to the conclusion you have just given me.
I suspect they will tax me at the pension provider end and for the top rate(like you said).
Not quite sure what you mean by the £1000 per, sounds interesting and would be acceptable to me with an initial removal of £12,000

QrizB

normandylife said:

Not quite sure what you mean by the £1000 per, sounds interesting and would be acceptable to me with an initial removal of £12,000

The pension rules allow pension companies to make regular payments from a drawdown pot (your £52k, from which you have already taken the 25% taxfree lum sum). So in principle you could ask your pension company to pay you £1000 per month until the pot runs out.

What's not clear to anyone is whether your paticular pension, with your particular pension company, has this as an option. You'll need to ask them.

If they say yes, great.

If they say no, they might be able to move your pension to a different pension scheme that they offer and which allows this. Or, if not you might need to move it elsewhere.

But you need to ask first, so you know what your options are.

Dazed_and_C0nfused

normandylife said:

Albermarle said:

You need to talk to the pension provider,and/or have a good look around their website about withdrawal options.
Normally it should be straightforward just to request a payment of £12K or any other sum. It can be a problem if the pension is an older one.
You will most likely find that when you get the payment, it will have been taxed more than you expect, but you can claim back any overpaid tax relatively easily.
Alternatively you could set up a regular payment of £1000 a month.

I am quite uneducated when it comes to pensions to my shame(take note those that are young, the day will come ), but I have basically come to the conclusion you have just given me.
I suspect they will tax me at the pension provider end and for the top rate(like you said).
Not quite sure what you mean by the £1000 per, sounds interesting and would be acceptable to me with an initial removal of £12,000

If the pension is your only source of PAYE income then taking £1,000 each month is likely to mean no tax will be deducted at source as the emergency tax code of 1257L would be used.

You then include details of the pension income on your Self Assessment return and if there is some tax for you to pay it will be part of your Self Assessment calculation and you pay that direct to HMRC.

If you took £12,000 all in go to start with them you could expect to have the best part of £4k in tax deducted.  And any overpayment due back to you would be resolved via your Self Assessment return*

*you could likely make a provisional repayment claim but you then need to remember to include that and the pension income on your tax return.

howard3844

can't see how old you are at present but if you take out £1047.50 per month, this will last for over 4 years and you will pay no tax (unless you have another source of income).

normandylife

howard3844 said:

can't see how old you are at present but if you take out £1047.50 per month, this will last for over 4 years and you will pay no tax (unless you have another source of income).

I am 64 in January.
I also draw a small HM Forces pension