Tax-free lump sum questions!

[deeen]

Hopefully any answers will help others in similar situations, not just me!

I'm still working at 60, and saving into the workplace pension. I also have a small pension from my twenties.

Can I take a tax free lump sum from my pension while I'm still working? Any implications for the tax on my salary?

Can I take 25% of the total value of both pots? Do I take 25% out of each, or do I have to combine them somehow?

I'm sure someone must have done this before! Any thoughts?

[Glosphil]

When I retired at 62 I took 25% lump sums out of 3 pension pots with different companies

[LeoSayer]

You can take 25% of each pot if they are DC-type schemes.

Whether you should is another question.

Edited by LeoSayer on Tuesday 17th December 08:10

[davepen]

deeen said:

I'm still ... saving into the workplace pension.
Can I take a tax free lump sum from my pension while I'm still working?

Yes you can take a lump sum, if you take any tax-able sum it triggers the MPAA.

Some workplace pensions don't allow you to be both a contributing and taking member at the same time.
Their rules appear to be you are either an employee, or retired.
I guess this avoids any "re-cycling" issues

Old schemes that you are not contributing to should be okay.

[deeen]

Ok thanks, crystallises my thoughts and prompts another question...

If my "old" pension is worth £10,000 and the pension fund I pay into with my current employer stands at £20,000, can I say the total is £30,000, 25% = £7500 and take £7500 from the "old" pension?

Or is it just a simple 25% from each scheme, so max. £2500 from the "old" pension?

[LeoSayer]

deeen said:

Ok thanks, crystallises my thoughts and prompts another question...

If my "old" pension is worth £10,000 and the pension fund I pay into with my current employer stands at £20,000, can I say the total is £30,000, 25% = £7500 and take £7500 from the "old" pension?

Or is it just a simple 25% from each scheme, so max. £2500 from the "old" pension?

The latter.

[Wicker Man]

You could merge the old pension into your newer one, to simplify the admin. It should be simple enough to do yourself online. Then take 25% of the total if that makes good sense for you.

[AndyAudi]

deeen said:

Ok thanks, crystallises my thoughts and prompts another question...

If my "old" pension is worth £10,000 and the pension fund I pay into with my current employer stands at £20,000, can I say the total is £30,000, 25% = £7500 and take £7500 from the "old" pension?

Or is it just a simple 25% from each scheme, so max. £2500 from the "old" pension?

If you need the money now,
Might be worth finding out how much your old fund is exactly, because if it is less than £10k you are able to take it all - although you’d pay tax on the amount over 25%. (That might not be so bad as if you’re going to qualify for a full state pension when you retire you’d probably/possibly have to pay tax on the personal pension anyway).

Taking a pension under the small pot allowance of £10k doesn’t trigger the rules that stop you from contributing to other pensions going forwards.

[AndyAudi]

davepen said:

Yes you can take a lump sum, if you take any tax-able sum it triggers the MPAA.

Unless the value of the fund is less than £10k & you take it all out. “small pot lump sum”

[deeen]

Thanks for all replies, I have a much clearer picture now!