I'm an ignorant pension bloke
Discussion
Go gentle.
I've got a some personal pensions and I thought I'd draw down some money from one of them. Apparently, PAYE will be deducted from any drawdown. I didn't know this. Why would anyone draw down when it costs you money to do it? My £800 a month would cost me £160!
Does this happen when you get to pension age and draw a pension? Also, when I start drawing a pension, how much will I be paid from my personal pensions? Who decides the amount?
Sorry for being so stupid. It will be far cheaper to cash in an ISA or two.
I've got a some personal pensions and I thought I'd draw down some money from one of them. Apparently, PAYE will be deducted from any drawdown. I didn't know this. Why would anyone draw down when it costs you money to do it? My £800 a month would cost me £160!
Does this happen when you get to pension age and draw a pension? Also, when I start drawing a pension, how much will I be paid from my personal pensions? Who decides the amount?
Sorry for being so stupid. It will be far cheaper to cash in an ISA or two.
My experience...
If you have SIP defined contribution pension pots...
Aged 55 plus and you can immediately take out 25% tax free.
You can draw down as much as you like but you pay tax on your total income including employment, personal pension and state pension over your £12,570 annual personal tax allowance.
Thats what I did and do.
What you can do can depend on what your pension provider allows but you can move pots to other more cooperative providers.
If you have SIP defined contribution pension pots...
Aged 55 plus and you can immediately take out 25% tax free.
You can draw down as much as you like but you pay tax on your total income including employment, personal pension and state pension over your £12,570 annual personal tax allowance.
Thats what I did and do.
What you can do can depend on what your pension provider allows but you can move pots to other more cooperative providers.
Edited by Actual on Tuesday 1st October 17:16
maccboy said:
Go gentle.
I've got a some personal pensions and I thought I'd draw down some money from one of them. Apparently, PAYE will be deducted from any drawdown. I didn't know this. Why would anyone draw down when it costs you money to do it? My £800 a month would cost me £160!
Does this happen when you get to pension age and draw a pension? Also, when I start drawing a pension, how much will I be paid from my personal pensions? Who decides the amount?
Sorry for being so stupid. It will be far cheaper to cash in an ISA or two.
If you are working then you are using up whatever personal allowance you have with then the Pension income using up the balance if applicable before any tax paid. I've got a some personal pensions and I thought I'd draw down some money from one of them. Apparently, PAYE will be deducted from any drawdown. I didn't know this. Why would anyone draw down when it costs you money to do it? My £800 a month would cost me £160!
Does this happen when you get to pension age and draw a pension? Also, when I start drawing a pension, how much will I be paid from my personal pensions? Who decides the amount?
Sorry for being so stupid. It will be far cheaper to cash in an ISA or two.
Your 20% tax number implies that you have no personal allowance left.
The quantum paid from your work pension will depend upon what your contract says.
If it is a private pension then the amount of drawdown is down to you with currently 25% being able to be taken as tax free.
When you get to State Pension age then that too will be paid to you and any tax then due will depend upon your other income at that time.
maccboy said:
I've got a some personal pensions and I thought I'd draw down some money from one of them. Apparently, PAYE will be deducted from any drawdown. I didn't know this. Why would anyone draw down when it costs you money to do it? My £800 a month would cost me £160!
Does this happen when you get to pension age and draw a pension? Also, when I start drawing a pension, how much will I be paid from my personal pensions? Who decides the amount?
Sorry for being so stupid. It will be far cheaper to cash in an ISA or two.
Pensions have a tax allowance on the way in, but are liable to income tax on the way out.Does this happen when you get to pension age and draw a pension? Also, when I start drawing a pension, how much will I be paid from my personal pensions? Who decides the amount?
Sorry for being so stupid. It will be far cheaper to cash in an ISA or two.
The amount you get from a State pension is fixed by the State, but with a private pension you can choose how much to take. I don't know about work pensions.
You still have your personal income tax allowance, so for the current financial year that's £12,570pa you can receive in income before paying income tax.
Withdrawals from an ISA are tax free, but the money you paid in was after tax so you took the hit then.
maccboy said:
No. Nothing. Where would they have got their information from? Probably a silly question, that! Would I have a default tax code that they've used?
If no other income then annualised your monthly pension is still below your allowance so yes sounds like an incorrect assumption / so called emergency tax being applied. Your provider will correct it so that your Gross and Net are identical ie no tax but it can take a few months for them to do this for some reason.
As such might be worthwhile going back to them now to have it amended.
Waiting for HMRC to correct will no doubt take much longer.
Most pension providers use the term ‘drawdown’ to imply the taxed part of income from a pension, i.e. the 75% of your pension pot that is taxed on withdrawal.
You need to ask for a tax free lump sum which, as above is up to 25% of your pot.
When the lump sum is taken, 3 times the lump sum amount (I.e. 75%) will be moved to a drawdown account to be taxed when it’s taken in the future, subject to your tax code and marginal rate of tax at that time.
You need to ask for a tax free lump sum which, as above is up to 25% of your pot.
When the lump sum is taken, 3 times the lump sum amount (I.e. 75%) will be moved to a drawdown account to be taxed when it’s taken in the future, subject to your tax code and marginal rate of tax at that time.
Edited by Dashnine on Tuesday 1st October 20:00
Dashnine said:
When the lump sum is taken, 3 times the lump sum amount (I.e. 75%) will be moved to a drawdown account to be taxed when it’s taken in the future, subject to your tax code and marginal rate of tax at that time.
Once it is moved to a drawdown account is it still invested? Or does it literally sit in an account not growing anymore?Also if you wanted to take the 25% but keep on working could you still invest money from your salary into your pension and get the 40% tax relief (until labour abolish it anyway)
ThingsBehindTheSun said:
Once it is moved to a drawdown account is it still invested? Or does it literally sit in an account not growing anymore?
Also if you wanted to take the 25% but keep on working could you still invest money from your salary into your pension and get the 40% tax relief (until labour abolish it anyway)
It can depend upon what type of drawdown account it is placed in , who the provider is and what type of Pension it is. Also if you wanted to take the 25% but keep on working could you still invest money from your salary into your pension and get the 40% tax relief (until labour abolish it anyway)
My private pension drawdown each year is taken out of the main pot, placed in a separate drawdown account but still invested in exactly the same funds and the pot then paid to me as cash each month.
Yes I risk the value of the drawdown pot reducing should funds lose value but equally I can have a surplus should funds do well.
ThingsBehindTheSun said:
Dashnine said:
When the lump sum is taken, 3 times the lump sum amount (I.e. 75%) will be moved to a drawdown account to be taxed when it’s taken in the future, subject to your tax code and marginal rate of tax at that time.
Once it is moved to a drawdown account is it still invested? Or does it literally sit in an account not growing anymore?Also if you wanted to take the 25% but keep on working could you still invest money from your salary into your pension and get the 40% tax relief (until labour abolish it anyway)
You're only limited in terms of pension contributions (lookup MPAA - drops from £60K pa to £10K pa) once you take a taxable amount from the pension, so yes you still get the tax relief with a tax free lump sum.
alscar said:
It can depend upon what type of drawdown account it is placed in , who the provider is and what type of Pension it is.
My private pension drawdown each year is taken out of the main pot, placed in a separate drawdown account but still invested in exactly the same funds and the pot then paid to me as cash each month.
Yes I risk the value of the drawdown pot reducing should funds lose value but equally I can have a surplus should funds do well.
That’s a good idea. I never even thought of that! Thanks alscar!My private pension drawdown each year is taken out of the main pot, placed in a separate drawdown account but still invested in exactly the same funds and the pot then paid to me as cash each month.
Yes I risk the value of the drawdown pot reducing should funds lose value but equally I can have a surplus should funds do well.
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