pension lump sum

[cyberknight]

I am going to take a lump sum from my pension , i got the form today stating the amount i requested i will pay tax on 75 % of it , now if im reading the blurb right if i take less than 25 % of my lump sum i don't pay any tax ? which means overall i will lose a lot less for takign only a smaller amount ,
Office is closed till the new year so i intend to ring them anyway but just asking the CC collective in advance

 

[Drago]

There is an upper limit for that 25%, above which it is taxed. That threshold was something like £80k when I retired but don't know what it might be now.

Perhaps some professional advice?

 

[Supersuperleeds]

Assuming it is a defined contribution scheme you can take up to 25% of the pot value tax free. You currently need to be aged 55 (or over) to do this. Once you have done a draw down the annual limit on tax free contributions into your pension changes.

Does your company offer you the chance to see a pensions advisor as part of the scheme? If so as a minimum speak to them. Drawing down on a pension has all sorts of implications, especially if doing it before retirement, so you really need to get professional advice.

 

[Gwylan]

Take as much as you can, without tax. My next step would be wack the mortgage

In summary not owing money is always a strong position to be in. Holding debt that is eroded by inflation is not a bad place to be.
If you make use of the flexibility that brings.

Are you confused?
Good, welcome to my world.

 

[roubaixtuesday]

25% tax free unless the pot is over a million

https://www.gov.uk/tax-on-pension/tax-free

By all means listen and mull over here, but please get proper professional advice.

 

[cyberknight]

yes im going to ring them in the new year , the documentation i have gives me all the details but i need to sort it out as the figure i had in mind and the limit are close enough that i can loose a bit but still be better in pocket .

 

[welsh dragon]

I took 25% of my private pension. I invested it. I'm glad I did it as I have a bit of peace of mind that I have a certain amount in reserve as you never know what may happen in the future. And I paid no tax on it.

 

[cyberknight]

Take as much as you can, without tax. My next step would be wack the mortgage

In summary not owing money is always a strong position to be in. Holding debt that is eroded by inflation is not a bad place to be.
If you make use of the flexibility that brings.

Are you confused?
Good, welcome to my world.

unfortunatly mrs ck has owned up to owing a lot on store cards i knew nothing about , some have told me not to take it from my pension but otherwise im just paying debt off on the never never at 30 odd % plus we have lost over £300 a month in disability after mini ck 1 was reassessed so if i dont clear these debts its money i cant afford the shortfall

 

[Pat "5mph"]

unfortunatly mrs ck has owned up to owing a lot on store cards i knew nothing about ,

Could Mrs CK declare herself bankrupt?
There won't be anything to pay on her card debt.
She would be barred from holding credit/store cards/any finance agreement for a few years, which could be a good thing.

 

[DCLane]

@cyberknight - @Pat "5mph" 's suggestion above may be a sensible one. I hope you're taking appropriate financial advice before affecting your long-term future income.

And my advice from experience is that MrsCK should be spending on a cash-only approach for a significant period or this is likely to continue without you realising.

 

[roubaixtuesday]

yes im going to ring them in the new year , the documentation i have gives me all the details but i need to sort it out as the figure i had in mind and the limit are close enough that i can loose a bit but still be better in pocket .

Not sure who you mean by "them" but I'd really strongly suggest you get independent advice on your whole financial position before taking lump sums from a pension.

 

[Buck]

Does your organisation offer a free consultation with an in depednent pension advisor. I would definitely say this should be your first route. If not, consider getting an IFA - you may have to pay but this is a once in a lifetime decision. You can’t afford to get it wrong!

As has been said, up to 25% of your pension pot can be taken as a tax free lump sum but be mindful that it will reduce your actual pension payments for the rest of your life (and your widow’s pension if ever applicable). Taking the lump sum has its advantages - it can be tax efficient in that your actual pension will have a lower amount that is subject to tax and also it gives you early access to monies that can be used to pay off existing debt, purchase something or invest.

My only advice would be to be careful not to be blinded by the lump sum - the reduction is based on an actuarial calculation and for example, mine is 1:12 in that if I take the lump sum then live for 12 more years after taking the pension, I am technically out of pocket plus your lump sum is no longer able to get annual increments which your pension will.
All very personal decisions and you need an independent appraisal that gives you the options and then for you to decide which is right for you and your circumstances.

 

[Buck]

Could Mrs CK declare herself bankrupt?
There won't be anything to pay on her card debt.
She would be barred from holding credit/store cards/any finance agreement for a few years, which could be a good thing.

@cyberknight - @Pat "5mph" 's suggestion above may be a sensible one. I hope you're taking appropriate financial advice before affecting your long-term future income.

And my advice from experience is that MrsCK should be spending on a cash-only approach for a significant period or this is likely to continue without you realising.

If the house is in joint names then this would NOT be a good move - the house would be at risk as the debt would be levied against any capital in the house.

 

[wafter]

I'll ill-placed to offer informed advice; however...

- The store card thing rings alarm bells; on top of some of the other stuff you've mentioned in the past. Have you done any research into abusive / manipulative relationships?

- The 25% tax-free lump sum sounds sensible from a tax perspective; especially if spent on coke and whores 👍

 

[Gunk]

The problem with taking your tax free lump sum early is that in the future all income you take is potentially taxable. I would take some expert advice before you jump in to it. It’s a big decision