Accessing tax free sum
Options
crimsoid
Posts: 13 Forumite
Is it possible to drawdown a tax free amount from a pension every month?
What I'd like to do is reduce my working hours and take a monthly tax free amount from my pension pot to make up for the reduced income. If I understand correctly this would also mean paying less income tax.
Using round numbers: with a pot of £200K I could take £50K as a one-off TFLS.
Could I instead draw on it at the rate of £10K per annum, leaving the rest invested?
If it's not possible to take a monthly amount then could I take a lump sum annually, put it somewhere that it generates some return and access it as required?
What I'd like to do is reduce my working hours and take a monthly tax free amount from my pension pot to make up for the reduced income. If I understand correctly this would also mean paying less income tax.
Using round numbers: with a pot of £200K I could take £50K as a one-off TFLS.
Could I instead draw on it at the rate of £10K per annum, leaving the rest invested?
If it's not possible to take a monthly amount then could I take a lump sum annually, put it somewhere that it generates some return and access it as required?
0
Comments
-
The short answer: You can only take 25% of your pot as a tax-free lump sum. Anything else you take is taxed at your marginal tax rate.
EDIT: For more see w w w dot moneyadviceservice.org.uk/en/articles/options-for-using-your-pension-pot0 -
The google terms you're after are 'phased drawdown' or 'phased/partial crystallisation.'
Essentially you start off with your untouched pot, and 'slice' off a bit each month/year, withdraw the 25% TFLS from that slice and keep the remaining 75% in what is essentially a different pot within your pension fund (to signify that the TFLS has been taken.)
It's the 'Non-taxable income' line in the grid at http://www.aviva-for-advisers.co.uk/adviser/site/public/products/aviva-platform/income-drawdown
Using your question in your last para, for example, you could crystallise 1/5th of your pot the first year, 1/4 of the remainder the next, 1/3 of the remainder the next...
I'd imagine you could do it on a monthly basis instead...Conjugating the verb 'to be":
-o I am humble -o You are attention seeking -o She is Nadine Dorries0 -
Thanks - what I want to do is exactly what you said in your 4th sentence.
After 5 years the remaining pot should have grown a bit and I have a deferred DB pension that I will be able to draw upon.0
This discussion has been closed.
Categories
- All Categories
- 343.2K Banking & Borrowing
- 250.1K Reduce Debt & Boost Income
- 449.7K Spending & Discounts
- 235.3K Work, Benefits & Business
- 608.1K Mortgages, Homes & Bills
- 173.1K Life & Family
- 248K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards