Nest pension tax free amount

Dazed_and_C0nfused

foxmarauder said:

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. 

I don't think anyone has ever posted on here about tax being deducted from a TFLS, it just doesn't ever seem to happen.

The amount of tax deducted from the taxable element will depend on how much is taken for the first payment.  Pension companies usually need to use the emergency tax code (1257L) on the first payment so no tax at all unless you take over £1,048 (in taxable pension).

DRS1

There is a page on NEST about taking money out of the pension.

This is one bullet point on that page

"When you take withdrawals from your pot, 25% will usually be tax-free and the remaining 75% will be taxed as part of your income for the year when you get the money. You may also be impacted by the tax-free lump sum allowance of £268,275, this is the total amount you can withdraw tax-free across all your pension schemes. For more information please see Your pensions and tax."

Following the link to Your pensions and tax gives you two sentences that say
"When you withdraw money from your pot, 25% will usually be tax-free.  The rest is normally taxed in the same way as any income you’d earn, like your wages."
and then there are a couple of examples of how the withdrawal and tax works.  Neither example shows you taking the 25% tax free bit out and leaving the 75% taxable bit behind.  And I think others on here have told you that is not something you can do with NEST.

Frankly if you are not worried about the MPAA and don't have enough taxable income to use up your personal allowance I wouldn't worry about this withdrawal.  But if you are worried about either of those things then stop debating things on here and call NEST ASAP to see if you can cancel that withdrawal.  The longer you leave it it the less likely that becomes.

poseidon1

In all fairness to the OP , I found myself having to delve into Nests Ts and Cs on retirement, and patiently explain the options to an acquaintance ( a newly retired lady solicitor no less) who was similarly befuddled.

In the end she opted for Nests Guided Retirement Fund, where they manage her retirement income withdrawals whilst holding back a cash amount on her behalf as a emergency fund. All rather paternalistic in my view, but evidently there must be a significant number of Nest members who do not have a clue, and find this 'hand holding' appealing

See below link to the Guided Retirement plan

https://www.nestpensions.org.uk/schemeweb/nest/investing-your-pension/fund-choices/guided-retirement-fund.html

As indicated by @dunstonh whether you self manage with Nest or utilise their Nest Guided Retirement Fund, they only appear to support UPFLS withdrawals.

Anyone wanting to do what the OP had in mind, has to transfer their pot to another provider that supports up front 25%  tax free withdrawals of their fund.

Albermarle

All rather paternalistic in my view, but evidently there must be a significant number of Nest members who do not have a clue, and find this 'hand holding' appealing.

I would guess it is not a significant number who do not have a clue, but the large majority.

poseidon1

Albermarle said:

All rather paternalistic in my view, but evidently there must be a significant number of Nest members who do not have a clue, and find this 'hand holding' appealing.

I would guess it is not a significant number who do not have a clue, but the large majority.

I had written 'majority' intially but then remembered a previous post that indicated the majority of members had voted with their feet and  stopped contributing completely- see below

https://moneyweek.com/personal-finance/pensions/nest-pensions?utm_term=88C8D3AB-801A-4BA2-9121-A59535747136&lrh=729ccc0544986d89d4ca75a2cc0e78738e9a6c52dec9dc1d0eab4f12ebe5bf8f&utm_campaign=3854FBCB-FE1F-457E-9C9A-87C5805A0127&utm_medium=email&utm_content=7CF90AF5-2779-4F80-BBCF-8F1FB263C723&utm_source=SmartBrief