Draw down / 25%tax free lump sum workings
Discussion
nickfrog said:
Totally confused now. Will probably pay an adviser to explain.
Look at question 2 here:https://www.hl.co.uk/retirement/drawdown/faqs
Slight thread derail question
Being made redundant soon'ish and aged 55
My current pension pot (DB scheme) is approx. 300,000
If for example I get 100,000 redundancy and put all of it into an AVC, (which would be DC)
Can I draw all of the AVC as my 25% and leave my DB scheme untouched or do I need to draw 25,000 from the AVC & 75,000 from the DB with the lower defined benefit?
Being made redundant soon'ish and aged 55
My current pension pot (DB scheme) is approx. 300,000
If for example I get 100,000 redundancy and put all of it into an AVC, (which would be DC)
Can I draw all of the AVC as my 25% and leave my DB scheme untouched or do I need to draw 25,000 from the AVC & 75,000 from the DB with the lower defined benefit?
Just a reply to the OP and the general thread.
You can take the tax free cash element without any penality on future contributions. It is only when you take the taxable money that this rule kicks in.
Of course, you should the other factors (the 6 rules) that come in to play.
If you suddenly start to make significantly higher contributions to a pension (after you have taken out the tax free cash) then HMRC is highly likely to be viewed this as recycling funds.
Give me a shout (here of via a PM) if you want to chat further without posting any financial details.
You can take the tax free cash element without any penality on future contributions. It is only when you take the taxable money that this rule kicks in.
Of course, you should the other factors (the 6 rules) that come in to play.
If you suddenly start to make significantly higher contributions to a pension (after you have taken out the tax free cash) then HMRC is highly likely to be viewed this as recycling funds.
Give me a shout (here of via a PM) if you want to chat further without posting any financial details.
Hijacking slightly....I’m WAY too young for it to affect me right now, but am I right in saying you don’t have to retire to take your 25%?
Our pension literature at work says you can take 25% tax free when you retire on or after your 55th birthday (rising to 57th in 2028, so probably about 95 by the time I retire.....) but is that right that you have to retire to access the 25%? Or can you just stay in the same employment but still take the 25%?
Our pension literature at work says you can take 25% tax free when you retire on or after your 55th birthday (rising to 57th in 2028, so probably about 95 by the time I retire.....) but is that right that you have to retire to access the 25%? Or can you just stay in the same employment but still take the 25%?
T6 vanman said:
Slight thread derail question
Being made redundant soon'ish and aged 55
My current pension pot (DB scheme) is approx. 300,000
If for example I get 100,000 redundancy and put all of it into an AVC, (which would be DC)
Can I draw all of the AVC as my 25% and leave my DB scheme untouched or do I need to draw 25,000 from the AVC & 75,000 from the DB with the lower defined benefit?
I believe with redundancy you can get 30K tax free - so perhaps you don't need to take the 25%Being made redundant soon'ish and aged 55
My current pension pot (DB scheme) is approx. 300,000
If for example I get 100,000 redundancy and put all of it into an AVC, (which would be DC)
Can I draw all of the AVC as my 25% and leave my DB scheme untouched or do I need to draw 25,000 from the AVC & 75,000 from the DB with the lower defined benefit?
For the rest, you should be able to put into a pension, if the company will do that....but you may need to check limits: you are limited to £40K per year, but may be able to use previous years *I think* - hopefully someone will come along with more accurate answers!
Maybe check https://www.moneyadviceservice.org.uk/en/articles/...
Just as an FYI, there is a pretty active pension board on tMoneySavingExpert forums here
OriginalFDM said:
Hijacking slightly....I’m WAY too young for it to affect me right now, but am I right in saying you don’t have to retire to take your 25%?
Our pension literature at work says you can take 25% tax free when you retire on or after your 55th birthday (rising to 57th in 2028, so probably about 95 by the time I retire.....) but is that right that you have to retire to access the 25%? Or can you just stay in the same employment but still take the 25%?
Absolutely right - once you hit that magic "pensions freedom" age, you can take up to 25% tax-free and continue to work and pay into your pension to the maximum allowed. Our pension literature at work says you can take 25% tax free when you retire on or after your 55th birthday (rising to 57th in 2028, so probably about 95 by the time I retire.....) but is that right that you have to retire to access the 25%? Or can you just stay in the same employment but still take the 25%?
Once you take a penny out from the 75% you didn't touch, you trigger the MPAA & are then limited to paying in £4k pa.
Of course, that is the rules today....who knows what it will be in even 5 years time!!
Hi Mike,
Thanks,
To rephrase the question,
Redundancy is around 140,000 so the 30 is already squirrelled away
Current and previous 3 years allowance is around 100,000 based on the DB pension x16 + ?? calculation, So this is where I get this figure,
I figure if/when i'm re-employed i'll start a new pension (prob DC) I can draw 25% of this new pension when I finally retire … Correct??
Thanks,
To rephrase the question,
Redundancy is around 140,000 so the 30 is already squirrelled away
Current and previous 3 years allowance is around 100,000 based on the DB pension x16 + ?? calculation, So this is where I get this figure,
I figure if/when i'm re-employed i'll start a new pension (prob DC) I can draw 25% of this new pension when I finally retire … Correct??
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