Small Pension Pot

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r1dgeback
r1dgeback Posts: 15 Forumite
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in Pensions, annuities & retirement planning
My wife is about to reach retirement age, doesn't work so hasn't paid any tax since 2016. She has a small pension pot (DC) of £7900 which will pay £23 per month or if she takes 25% £1975 will pay £16 per month. the question I'm asking is as she hasn't worked for three years and paid no tax can she take the full amount of £7900 and not pay any tax at all

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  • Silvertabby
    Silvertabby Posts: 9,023 Forumite
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    r1dgeback wrote: »
    My wife is about to reach retirement age, doesn't work so hasn't paid any tax since 2016. She has a small pension pot (DC) of £7900 which will pay £23 per month or if she takes 25% £1975 will pay £16 per month. the question I'm asking is as she hasn't worked for three years and paid no tax can she take the full amount of £7900 and not pay any tax at all


    Yes - but as the pension company are unlikely to have a HMRC tax code to work with, they will tax the 75% element. Your wife will then be able to claim it back from HMRC.
  • LHW99
    LHW99 Posts: 4,219 Forumite
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    Is this her only pension? What is her predicted state pension? One use for the money if it is not needed to pay off debts would be to buy extra years to increase her SP which would be index linked.
  • r1dgeback
    r1dgeback Posts: 15 Forumite
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    My wife will be entitled to full State Pension in 2021 (due to Pension Law change) how would that work
  • LHW99
    LHW99 Posts: 4,219 Forumite
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    r1dgeback wrote: »
    My wife will be entitled to full State Pension in 2021 (due to Pension Law change) how would that work
    If she is already earning the full (new) state pension, then there is no more she needs / can do.
    However your first post said "My wife is about to reach retirement age, doesn't work so hasn't paid any tax since 2016."
    The changeover between the old and new schemes was in April 2016, so if her SP is less than the full new state pension (£168 something just now) then she may be able to add to what she has up to 2016 by buying post-16 years.
  • MrsFingersCrossed
    MrsFingersCrossed Posts: 93 Forumite
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    As others have said, yes she can take the lot, will be taxed on it but can fill in a form and claim the tax back - she doesn't have to wait till the end of the tax year.

    Another thought worth mentioning - the marriage allowance that can be transferred to you. This transfers part of your wife's tax allowance to you (currently £1,250 I think) which raises your tax threshold so you won't pay as much tax. As long as your wife's income is within (below) her personal allowance this is worth doing, and I think it can be backdated.
    As a fan of THE NUMBER THREAD, our NUMBER IS £22,000 a year = FREEDOM
    Amended 2019 - new NUMBER is approx £27k pa nett (touch wood)
    Amended 2021 - new NUMBER is approx £29k pa nett - heading that way...fingers crossed!
  • xylophone
    xylophone Posts: 44,422 Forumite
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    My wife will be entitled to full State Pension in 2021 (due to Pension Law change) how would that work

    Your wife has obtained a state pension forecast?

    https://www.gov.uk/check-state-pension

    Is this small DC pension her only pension apart from state pension?
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