only 47 but being offered a cash lump sum from closing pension.

Akaroa

Hello All, first time on the Forum so please bear with me. I am only 47 and have recently received a letter regarding a pension i was briefly in at a former job.
 
The pension fund is closing and i am being offered the chance to take a cash lump sum of approx £2000 (25% will be tax free) so will be taxed on around £1500. 

as opposed to doing nothing and receiving £80.00 per annum when i retire. 

My concern is if i take this lump sum will it affect my tax code and place me on Emergency tax? my Salary is around £30,000 so i am taxed at 20%. 

Could anyone offer any insight as to how this would impact my tax code should i choose to take this amount?

Thanks in advance!

DRS1

So you're not asking how you could be offered such a payment given that you are under 55?

DRS1

Winding-up lump sums - Royal London for advisers

If you go to the end of this note it explains the tax.

Marcon

Akaroa said:

Hello All, first time on the Forum so please bear with me. I am only 47 and have recently received a letter regarding a pension i was briefly in at a former job.
 
The pension fund is closing and i am being offered the chance to take a cash lump sum of approx £2000 (25% will be tax free) so will be taxed on around £1500. 

as opposed to doing nothing and receiving £80.00 per annum when i retire. 

My concern is if i take this lump sum will it affect my tax code and place me on Emergency tax? my Salary is around £30,000 so i am taxed at 20%. 

Could anyone offer any insight as to how this would impact my tax code should i choose to take this amount?

Thanks in advance!

It's a one off winding up lump sum, so nothing dodgy. You'll get 25% tax free and the pension provider will deduct basic rate tax from the remaining £1,500. Neither of those actions will impact on your tax code unless you're a higher rate taxpayer or the £1,500 would push you into a higher tax bracket - and if you are on a salary of £30k with little or no other taxable income, that won't apply.

molerat

Akaroa said:

Hello All, first time on the Forum so please bear with me. I am only 47 and have recently received a letter regarding a pension i was briefly in at a former job.
 
The pension fund is closing and i am being offered the chance to take a cash lump sum of approx £2000 (25% will be tax free) so will be taxed on around £1500. 

as opposed to doing nothing and receiving £80.00 per annum when i retire. 

My concern is if i take this lump sum will it affect my tax code and place me on Emergency tax? my Salary is around £30,000 so i am taxed at 20%. 

Could anyone offer any insight as to how this would impact my tax code should i choose to take this amount?

Thanks in advance!

Or the third option of transferring it to another pension.

Marcon

molerat said:

Akaroa said:

Hello All, first time on the Forum so please bear with me. I am only 47 and have recently received a letter regarding a pension i was briefly in at a former job.
 
The pension fund is closing and i am being offered the chance to take a cash lump sum of approx £2000 (25% will be tax free) so will be taxed on around £1500. 

as opposed to doing nothing and receiving £80.00 per annum when i retire. 

My concern is if i take this lump sum will it affect my tax code and place me on Emergency tax? my Salary is around £30,000 so i am taxed at 20%. 

Could anyone offer any insight as to how this would impact my tax code should i choose to take this amount?

Thanks in advance!

Or the third option of transferring it to another pension.

Better bet is to take the cash and then reinvest it in OP's current workplace pension (or other personal pension arrangement). The amount is too low to fall foul of recycling regulations, and there'd be an extra bit of tax relief (bringing it up to around £125 once safely tucked into another pension) making it a better deal - even more so if OP's employer will let them make the contribution by salary sacrifice (and might even get an extra bit of employer contribution).

FIREDreamer

No MPAA implications presumably?