Pension Query

SpongeMuppet

Good evening all
im wondering if you can help me please?

My wife is currently finding her workplace difficult to be in & I’m wondering if there is a way to draw a lump from my pension to use to pay a years salary so she can leave, but for it to not cost me a chunk in tax on my earnings?

ultimately the impact of work may make it necessary to take this route anyway but any advice to help alleviate the tax implication would be gratefully received - thanks 

artyboy

SpongeMuppet said:

Good evening all
im wondering if you can help me please?

My wife is currently finding her workplace difficult to be in & I’m wondering if there is a way to draw a lump from my pension to use to pay a years salary so she can leave, but for it to not cost me a chunk in tax on my earnings?

ultimately the impact of work may make it necessary to take this route anyway but any advice to help alleviate the tax implication would be gratefully received - thanks 

Probably best if this were moved to the pensions forum. But basically... "it depends" on

- what sort of pension you have (DC or DB)
- if DC, how big is the pot
- are you old enough to access it
- how much are you trying to take out

if it's a big enough DC pot, then you may (if it is a sufficiently modern and flexible pension) be able to crystallise enough to take out enough tax free cash to cover your needs, while leaving the taxable portion untouched...

Albermarle

As above, you need to supply more detail.

SpongeMuppet

Well as it stands it’s a pot with around 40k in it that’s has been dormant for a while , but last year I took the tax free part out and then this year the whole work situation has worsened for my wife, so I have a pot which I can draw from but my tax free sum has in essence been used already …..I have another pot with about 5k which I am still contributing to and I’m still currently working full time ….I’m 56 yrs old . Hope that helps

DRS1

As you have already used the tax free cash, if you draw from the 40k pot you will trigger the MPAA which limits your pension contributions to a DC pension to 10k pa.

Do you seriously only have 45k in pensions or do you have something else you haven't mentioned?  I don't know what you earn but it doesn't seem like a lot of pension especially at 56.  Certainly not enough to be spending some of it now.

SpongeMuppet

Thanks for the info, nope that’s it….as somebody who is earning a smidge under 30k a year at the moment and that’s the highest I’ve ever earned, I guess many years on managing on considerably less with family responsibilities too just makes me realise that I really was as low paid as I felt….the info you gave was much as I feared - thanks for your advice, it’s genuinely appreciated 👍

DRS1

What I did not say was that with the tax free cash used up if you withdraw say 10k from the 40k pension then you will be paying 2k of tax on that.  If you drew the whole 40k then you would be putting yourself into higher rate tax territory so 40% tax on about half of it.

I suppose you have definitely used up all the tax free cash?  If you didn't use it all then the 40k pension would be split between crystallised and uncrystallised pots and you would be able to take 25% of the uncrystallised pot tax free.  Sometimes the crystallised pot is called drawdown fund or some such.

MallyGirl

I'll request a move to the pension board