Taking second pension @ 55

Riddell · 13 June 2018 at 6:16PM

Hi I have two pensions and would like to totally cash in my second pension which has a value of £20,000, I know I can get £5,000 tax free. But how much tax do I pay on the £15,000, I am currently having the summer off work and with PA £11,800 on any earnings or pension draw down I might extend my holiday till April 2019.
But I’m sure I’ve read somewhere that I would have to pay increased tax taking my pension at 55.
Thanks I’m advance

Dox · 13 June 2018 at 6:32PM

You add the £15,000 to the rest of your earnings in the tax year in which you draw it and are then taxed on the lot as if you had 'earned' it all, so the £15,000 from your pension would be taxed at your marginal rate. You only pay more tax because your income has gone up (in your case by £15,000), not because you are drawing a pension at 55.

Details of tax bands etc at https://www.moneysavingexpert.com/banking/tax-rates

dunstonh · 13 June 2018 at 6:37PM

And dont forget your annual allowance will be reduced. Currently to just £4,000 (but subject to further reductions potentially). For someone in their 50s, a £4,000 limit could play havoc with their retirement planning.

Taking second pension @ 55

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