Most tax efficient way to draw down personal pension

stopthetories

I am 60, retired early and look forward to an NHS pension when I am 65. In the meantime I have a personal pension of about £70K which i would like to withdraw ALL as income between now and then (2030). I have no other income but living on my husband's pension. What is the most tax efficient way to draw down the £70K? - Would it be better to take all the the 25% lump sum (£17,500) in this tax year plus a further £12570 in personal tax allowance (total = £30,070) and then take the remainder in equal shares OR take one-fifth of the £70K each year?

Secondly, would it be better to take it as a monthly income or as a lump sum in each tax year?

zagfles

It's unlikely to make a difference, you shouldn't pay any tax either way. If you take the lump sum up front you could put it in an ISA to avoid tax on interest/investment returns assuming you've not used your ISA allowance. However are you entitled to the marriage allowance? Is your husband a basic rate taxpayer? See Marriage Allowance: How it works - GOV.UK

SarahB16

Neither in my opinion. Instead I would take £16,760 every year until it runs out. 25% tax free (£4,190) and the taxable 75% equals £12,570 so no tax to pay as covered by your personal allowance.

Don't take less than £16,760 per year as you would be wasting your personal allowance.

af1963

If you take the tax free cash up front (17.5k) and then approx 12.5k per year for 5 tax years, that would add up to more than your £70k, so you should be able to do that even allowing for a little further growth in the remaining pension over the period. ( And if you get higher growth, and have to pay a bit of tax as a result, that's a good thing.)

Monthly or annually won't make any difference tax-wise.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6652654/most-tax-efficient-way-to-draw-down-personal-pension

Back in 2024 you said you were going to retire and would then have a pension of £4,000/year.

What's happened to that?

Have you applied for Marriage Allowance? If so that will limit the amount you can take without paying any tax.

poseidon1

https://forums.moneysavingexpert.com/discussion/6652654/most-tax-efficient-way-to-draw-down-personal-pension

As indicated by Dazed_and_C0nfused what did happen to the £4,000 p.a pension you were supposed to be receiving at end of 2024?

stopthetories

Thank you for your comments all. Very grateful for your advice. Re: marriage allowance - my understanding is that I can only apply for that if my spouse is not using their tax allowance?

My apologies for any confusion with earlier posts - the £4000 pa pension mentioned in my earlier post is happening - in this thread I was trying, maybe mistakenly, to simplify the question about personal pension drawdown to find an 'in principle' answer as to whether there are any tax implications of taking the 'lump sum' at the outset or not.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81863330#Comment_81863330

If you were to apply then you would be giving up part of your allowance and they could benefit from a reduction in the tax they pay (assuming they aren't a higher rate taxpayer).

Not sure why you would want to do that if your spouse wasn't even using their own Personal Allowance though 🤷

Maybe you could clarify exactly what the correct situation is with your income? Presumably the £4,000 has increased a little?

stopthetories

Thanks for the comments, much appreciated all. It is very valuable to get these perspectives 🙏