Tax implications of pension pot after annuity purchased

TimTam99

Hi,

I purchased an annuity with my pension pot last year and did not withdraw a lump sum.

After this there were still a few months of contributions as I did not finish work immediately meaning there is still £4000 in the same pension scheme.

The £4k is only worth a very small amount from the total annuity purchase / original pension and no where near 25%.

Can I take the remaining pot as part of my tax free lump sum ?

(ie is the 4k remaining seen as part of the total pension pot for tax purchases before the annuity purchase or not).

Thank you.

Ib06

There is a "Money Helper" government service that can help with these sorts of questions here www.moneyhelper.org.uk they have quite a lot on pesnions etc..

You can look stuff up on the site and ask questions, I believe you can also arrange telephone meeting to discuss tax implications of various options.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6664596/tax-implications-of-pension-pot-after-annuity-purchased

Why do you think taking more than £1,000 as a TFLS is possible?

It may be but it sounds unlikely to me, I suspect you missed that boat when you chose to purchase an annuity with all of the funds available at that time.

Albermarle

I purchased an annuity with my pension pot last year and did not withdraw a lump sum.

That is a pretty unusual move to miss out on the tax free part. Why did you do that ?

westv

https://forums.moneysavingexpert.com/discussion/comment/81966918#Comment_81966918

Yes, Use it or lose it.

TimTam99

https://forums.moneysavingexpert.com/discussion/comment/81966918#Comment_81966918

Dont know what TFLS means in this context. However if you are saying the 4k is liable to tax then I have my answer thank you.

TimTam99

Purely because I wanted a guaranteed certain minimum amount of income. I have other funds outside of the pension hence did not need a lump sum.

phlebas192

https://forums.moneysavingexpert.com/discussion/comment/81967336#Comment_81967336

TFLS = tax free lump sum which, whilst it is a commonly used term is rather inaccurate. PCLS = pension commencement lump sum is a better term in that it correctly identifies that it is only availble when you start taking pension benefits. But even then that's a bit misleading as the "start taking" is related to the specific previously unaccessed amount rather than the whole lot.

In your case, no you cannot now get any tax free cash from the amount used to purchase the annuity. You had to claim it at the time.

As for your additional £4k, that has not been accessed and so you can claim 25% of that amount (£1k) tax free. The remaining £3k would be subject to your marginal income tax rate when withdrawn.

TimTam99

Perfect - thank you kindly phlebas192 :)

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81967336#Comment_81967336

Tax free lump sum. If you have £4,000 uncrystallized pension fund and the overall TFLS limit (over £250k) isn't an issue then you can take £1,000 as a TFLS. The remaining £3,000 would be taxable income.