Nest pension tax free amount

foxmarauder

Hi. I am so confused. I wanted to take the 25% tax free from my nest and at over £14,000 I made that to be around £3,500 tax free. I entered that amount and it said I would be paying £950 on that in tax. I got flustered and ended up only entering £1,000 to withdraw so now I have no idea what happens now or when I can withdraw any more without being taxed. Can anyone explain what went wrong please. I would be grateful. 

DRS1

Do they allow you to take a TFLS on its own?

I think it would be a good idea to call them and ask what you did wrong and how it can be corrected.  

You never know - even that £1000 withdrawal could have unforeseen consequences.

dunstonh

Can anyone explain what went wrong please. 

Nest does not offer drawdown.   So, the transaction you wanted to do is not available. 
Instead, you have carried out an Uncrystallised Funds Pension Lump Sum (UFPLS).    That means you have taken £250 tax-free and £750 taxable.   

You have also triggered the MPAA by doing this.    That means if you ever pay into a pension again (or currently do so) then you must tell the provider that you triggered the MPAA.     This limits the amount that can go into a pension each year.

tacpot12

You are probably better off calling NEST. They will be able to tell you what you did wrong, and also whether they can cancel the payment you have requested so you can have another go. 

Before doing so, are you sure you want to take all the tax-free money available?  Doing so means that you will pay tax on everything you subsequently withdraw from the pension, and if you find yourself in a position where to need to take more money (e.g. because of an unexpected bill), you will trigger the Money Purchase Annual Allowance (MPAA), which may be a bad think if you are still working and want to continue to pay into your pension, or you  might receive an inheritance. 

foxmarauder

The £1000 was allowed and it said no tax. There was no explanation about triggering anything about MPAA and I dont understand unchrystalised funds. It is all as clear as mud. 

MallyGirl

foxmarauder said:

The £1000 was allowed and it said no tax. There was no explanation about triggering anything about MPAA and I dont understand unchrystalised funds. It is all as clear as mud. 

Your best hope is a call to them to get this transaction reversed. As soon as you take even a penny of taxable income you trigger the MPAA. There are usually lots of warnings about this when drawing down any pension money

foxmarauder

All I wanted to do was take my 25% lump sum and then take money when needed after that. I no longer work and do not contribute to a pension now. 

dunstonh

foxmarauder said:

The £1000 was allowed and it said no tax. There was no explanation about triggering anything about MPAA and I dont understand unchrystalised funds. It is all as clear as mud. 

There would be no emergency tax taken on £750.   
However, if your taxable income exceeds your personal allowance, then it will be taxed.

I haven't used Nest but their online site does explain the options.  I would assume the declaration would say you understand what you are doing.

All I wanted to do was take my 25% lump sum and then take money when needed after that. I no longer work and do not contribute to a pension now. 

Nest does not offer that.    Basically you wanted to do something that Nest couldnt do.  That is why you were not seeing what you expected to see.

DRS1

foxmarauder said:

All I wanted to do was take my 25% lump sum and then take money when needed after that. I no longer work and do not contribute to a pension now. 

If you are never going to contribute to another pension then you may not worry about the MPAA being triggered.

If you think there is any chance you would get another job and want to contribute more than £10k pa (employer and employee contributions combined) then you should call the NEST Call Centre ASAP to see if you can cancel the £1k withdrawal, check if they can do it the way you want (just TFLS and not draw anything taxable (answer probably No)) and then ask about doing a transfer (but for that you would need a new pension scheme and that new pension scheme would initiate the transfer). 

penners324

Call Nest, cancel it. Then get it transferred to one of your other pensions that does offer drawdown 

foxmarauder

The following is what it said on the nest site for the option I was choosing. ( "2. Take your money as several lump sums If you’ve got £3,000 or more in your Nest pension pot, you can withdraw a lump sum every month, or less frequently if desired. The rest of your money will remain in Nest. You must withdraw a minimum of £200 at a time and leave £2,000 or more in your pot. Risks Your pension pot will reduce with each withdrawal and your money could run out. Once you’ve taken any money from your Nest pension or any other pension, then you usually won’t be able to pay more than £10,000 per tax year into any pension savings without paying extra tax. This may reduce your ability to save enough for your retirement. Tax implications Usually, you can take the frst 25% of your pot tax-free. The remaining 75% is taxable in the same way as income, like your wages. A cash withdrawal, when added to any other income you receive, may increase the amount of income tax you have to pay in that year".)  I have retired early due to ill health and not paying tax so I guess it is because I am not yet receiving state pension, as to why they were going to charge Tax on the 25% due to no tax code at present.