Time From Requesting Part of Tax Free Pension Money to Receiving?

mrklaw

this might be better as a new thread but I’ll start here.

so drawing money initially at least can take a little while. If you need it for a certain date you might want to get started a month earlier for safety?

we’re planning on retiring at the start of a new tax year partly so its spring, partly thinking we want as much personal allowance as possible. But hearing about timing got me thinking.

if we want an April 1 ‘salary’ we’ll need that money to be in our accounts in March. Which HMRC will tag onto our march salary which for me would be HRT and my wife would have no personal allowance. So ideally we can’t receive any money until April. And then that starts you down the other issue of HMRC emergency taxing you. I was thinking to keep some of the 2-3 years cash buffer in MMF inside the pension for tax protection, but that’ll still be considered income when you draw it.

I’ve been ignoring ISAs as we’re past pension access age so wanted to get the tax relief. but is the best route to have at least one year of income in our ISAs - that can fund the first year without any worry about triggering tax etc, and then we can plan to draw year two from the pensions towards the end of the first year (Feb/Mar) ready for year two?

edit: April 6th onwards - retire in April but payments in new tax year..

dunstonh

so drawing money initially at least can take a little while. If you need it for a certain date you might want to get started a month earlier for safety?

As you're accessing the taxable amount, That has to go through payroll and is not as quick as the tax-free lump sum, which doesn't go through payroll. So a month or two would be ideal. Most modern providers can actually forward date up to many months into the future. I.e., you could do it three months earlier and select the date that you want them to process it through payroll.

However, not all providers will have that functionality.

if we want an April 1 ‘salary’ we’ll need that money to be in our accounts in March. Which HMRC will tag onto our march salary which for me would be HRT and my wife would have no personal allowance. So ideally we can’t receive any money until April.

Some providers won't allow the first date in April because of Easter and the chance of it slipping to the wrong side as the tax year. Realistically, you can do it any time in month 12. You don't need to leave it as late as that. So as long as it's after March 6th, you are in month 12.

However, if you didn't mean April 1st, which is in month 12, but you wanted month one, then you need to have it paid after April 6th.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82015449#Comment_82015449

As you're accessing the taxable amount, That has to go through payroll and is not as quick as the tax-free lump sum, which doesn't go through payroll.

Clearly it will vary from provider to provider, and whether there is a financial advisor organising it or not.

My own DIY experience was that I first requested some tax free cash. Due to a specific issue I had to fix a telephone appt with them first, which delayed things by a week, but this would not always apply. After that it took 8 working days to send the tax free cash, and set up the drawdown account and transfer the funds. Later I requested more tax free cash online and it also took 8 working days. Then I asked for some taxable money from the drawdown account and it only took 5 working days.

mrklaw

thanks @dunstonh whej I’m closer I’ll check if they can ‘preprocess’ things for an April 6th or later payment although I think perhaps safer to have year one in an ISA if it’s possible for us to plan that - we’re doing everything salary sacrifice into pensions right now so taking the hit to take it from net salary doesn’t attract me but let’s see

af1963

Emergency tax doesn't need to be a dealbreaker, as it's fairly simple to claim back.

Take the 25% tax free portion of what you intend to withdraw in the first retirement year, in advance before April 6th, to give you a cash buffer for the first few weeks. Request the corresponding taxable drawdown amount to be paid to you after April 6th (minus the emergency tax). Reclaim any overpaid tax. Should have it back within a few weeks after claiming.

Or: as above, but take out enough TFC to live on until later in the year, take a small initial payment to trigger a PAYE tax code to be sent to the pension provider, then withdraw the taxable income towards the end of the year when PAYE won;t tax it as much.

Shifting TFC from the pension into an ISA is a 'neutral' move - you can invest it tax free in broadly the same things in either. So if it gives you a bit of flexibility in when to take the taxable part, it's worth considering taking it.

mrklaw

https://forums.moneysavingexpert.com/discussion/comment/82015593#Comment_82015593

simple and smart, thanks.

NormalNorman

Personally, I see nothing wrong with timing the mortgage to end at retirement but taking hefty repayments into retirement means you may put yourself in HRT for the sake of investment returns which surely you have achieved during your working life?

For us the mortgage ended naturally a very long time ago so didn't see any point of not letting that happen. I had done my stint of complexity of milking the financial system in other ways so prefer as little as possible being deducted from the current account these days.