Who to take lump sum when still working

oliel

Hubby is still working and earns approx £31750 this year. He wants to take out all of a small private pension that probably totals £12k 25% of this will be tax fee the rest he will be taxed on when is the best time of year to take it. We are in Scotland so 42% tax from £42663 upwards so i think the balance of the pension will be taxed at 21%. Would he be better taking the lump sum prior to 5/4/26 or after - I suspect they may take higher rate tax from him that will ill have to claim back via a p53 form?

Baldytyke88

It would be a good idea to put into his pension the full amount allowable on his earnings of £31750, then withdraw what he wants, it maybe too late to withdraw this year with some pension companies.

To withdraw from your pension before the new tax year, the last date to initiate the request is usually in
late March, often around March 20th–25th, to allow providers time to process it by 5 April.

He needs to be quick!

Marcon

Have a look at the identical question you asked in respect of your own pension in January, which gives you all the information you need:

https://forums.moneysavingexpert.com/discussion/6651205/withdrawing-all-of-pension-at-55-which-date-in-tax-year-is-best

It would be a good idea to put into his pension the full amount allowable on his earnings of £31750, then withdraw what he wants, it maybe too late to withdraw this year with some pension companies.

Not such a good idea if the source of any such contribution came from withdrawals from an ISA.

Baldytyke88

https://forums.moneysavingexpert.com/discussion/comment/81932906#Comment_81932906

The contributions would obviously come from his earnings.

Marcon

https://forums.moneysavingexpert.com/discussion/comment/81933424#Comment_81933424

Not sure it's obvious…what's he going to live on if he puts over £25K of his earnings (minus any personal contributions made already during this tax year) into his pension - a lump sum he needs to find immediately as you're clearly suggesting he does so in the next week, given that you've said:

To withdraw from your pension before the new tax year, the last date to initiate the request is usually in late March, often around March 20th–25th, to allow providers time to process it by 5 April. He needs to be quick!

The MPAA would be triggered if he takes any taxable cash from the pension and future contributions would be limited to £10K per annum (including tax relief and any employer contributions).

All in all, probably not such a great idea…

Baldytyke88

https://forums.moneysavingexpert.com/discussion/comment/81933470#Comment_81933470

This board does have wealthier posters, an MPAA of £10k is well over anything that the average person would contribute to their pension in a 12-month period, unless they are specifically contributing near to retirement.