Claim now or wait until the new tax year

[Deleted User]

Hi all, question please if I may , my OH has took early retirement as of last month. He has 3 pensions, one of which has a monthly amount paid for life. Given that it took 12 whole months to get a refund on my over taxed pension, when is the best time for him to start claiming this pension, he's paid April to April, and will get his last (1/2) wage in December, should he wait until the new tax year or should he start claiming it now, he will be taking a 25% tax free lump sum, so we are waiting his last pay to find out if that lump sum will put him over the basic rate for tax, if it does then I guess we should wait until April but if not is it easier to take it now why he still has his PAYE tax code in order to avoid an emergency tax one, or do we still wait....I hope I've made sense 

Isthisforreal99

[Deleted User] said:

Hi all, question please if I may , my OH has took early retirement as of last month. He has 3 pensions, one of which has a monthly amount paid for life. Given that it took 12 whole months to get a refund on my over taxed pension, when is the best time for him to start claiming this pension, he's paid April to April, and will get his last (1/2) wage in December, should he wait until the new tax year or should he start claiming it now, he will be taking a 25% tax free lump sum, so we are waiting his last pay to find out if that lump sum will put him over the basic rate for tax, if it does then I guess we should wait until April but if not is it easier to take it now why he still has his PAYE tax code in order to avoid an emergency tax one, or do we still wait....I hope I've made sense 

Why would a tax free lump sum take him over the basic rate limit for tax?

[Deleted User]

We'll it shouldn't, but I'm unsure how it works with this pension as he will be taking a monthly payment, unlike mine which I took in one go and cashed the lot in, in total....is that why I got stopped emergency tax because I cashed mine in, in full and had no previous taxable income ?

Isthisforreal99

[Deleted User] said:

We'll it shouldn't, but I'm unsure how it works with this pension as he will be taking a monthly payment, unlike mine which I took in one go and cashed the lot in, in total....is that why I got stopped emergency tax because I cashed mine in, in full and had no previous taxable income ?

A tax free lump sum is exactly that, it has no bearing on taxable income.

Is it a DB or DC pension scheme

[Deleted User]

I think I got a bit mixed up, sorry, yes you are right, the 25% won't make a difference, it's the monthly payments I should be concentrating on, if he takes that pension it will generate a monthly income, I assume this will be taxed, but if he waits until April this will be his only income and it's a very small amount so I assume it won't be taxed, but will it then be on an emergency tax or should it just continue on his current tax code ?

[Deleted User]

I get the DC and DB mixed up, he has 3 pensions and I know this is the only one where he has to have the monthly payments as in no option for draw downs etc

Isthisforreal99

When you say 'very small' how much are we talking?  If it's less than tlthe tax free allowance I would claim it in the next tax year as I assuming he will earned more than the tax free allowance in his job?

[Deleted User]

Less than £400 a month, he's already paid tax on his earnings from april until now, he is a Basic tax payer 

Isthisforreal99

At £400 pm even if an emergency tax code were operated no tax would be deducted.

Brie

he can always apply to have things started as of next April.  it usually takes a couple of months in any case for most pension admin.  And it will get more busy towards the end of the tax year as everyone else will be panicking.

[Deleted User]

Thank you, that's cleared my rather muddled mixed up original question...
He will also have the option to draw down on a second pension but i think he's also going to do this as a monthly option too ....as and when he decides to start accessing that one too, the last pension is a smaller one, he was thinking of cashing that in, in full or possibly transferring it into the other pension that offers draw down, so will look into that option.