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swift1894

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On 08/03/2019 at 13:32, Machpoint005 said:

 

Once you are over the threshold the state pension is reduced by the appropriate amount. The OP needs to take ALL income into account. 

Wish it worked that way but no despite the same department paying your pension and then assessing your tax. They pay your state pension without tax deductions, then change your tax code for your private pension and if, because of other income this is not enough, they send you a bill to pay by 31st Jan every year.  You also get a b*** form even though nothing changes from year to year, if they would deduct tax on the state pension I would have no problem just like PAYE.

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3 minutes ago, Peter X said:

 

An application for UFPLS should be made in good time to avoid the winter rush, but note that the payment will be taxed on a month 1 basis, i.e. they may well deduct too much tax and you'll need to fill out a tax return and wait to get a refund. So the earlier in the tax year you draw the money, the longer you wait for a tax refund. Nov/Dec is probably a good time to do it.

 

That month 1 basis thing is one of the reasons why my preference is to take the whole 25% in one go. Which is what I did with one of my two SIPPs. The other has not been touched yet as I am still paying into it (from my DB pension).

 

The 25% could then either be reinvested in an ISA (which is what I did with mine) or held as cash for living expenses until it's all gone.

 

 

 

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On 08/03/2019 at 12:19, swift1894 said:

Just wondered if some chooses to “Drawdown” their pension but takes less than £11,850 (personal Allowance) per year, is that all tax free, because I know that if they choose an annuity, only 25% is a tax free lump sum and the monthly payment is taxable?

Yes it is tax free if all your income is under your personal allowance. Each time you draw down a block of cash 25% of it will be tax free, so you can you can drawing down more than your personal allowance and still not ultimately pay any tax.  You will probably find that you get taxed at source as though you take the payment every month, as paye does not seem to work well with irregular payments. You use a P55 form (online if you want to) that you can fill out to get the excess tax payed back, I have just done that myself.

 

 

12 minutes ago, Lily Rose said:

 

That month 1 basis thing is one of the reasons why my preference is to take the whole 25% in one go. Which is what I did with one of my two SIPPs. The other has not been touched yet as I am still paying into it (from my DB pension).

 

The 25% could then either be reinvested in an ISA (which is what I did with mine) or held as cash for living expenses until it's all gone.

 

 

 

Depending on your circumstances that could be very bad advice, your pension pot is in a trust and therefore outside of your estate, taking the 25% cash in one go will bring all that into you estate.

Edited by john6767
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I think it is highly unlikely any government would scrap the 25% tax-free for existing pension pots (though I'm not sure I'd trust Corbyn not to) but it is another reason my preference is to take the whole 25% in one go. Just in case.

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42 minutes ago, Lily Rose said:

I think it is highly unlikely any government would scrap the 25% tax-free for existing pension pots (though I'm not sure I'd trust Corbyn not to) but it is another reason my preference is to take the whole 25% in one go. Just in case.

Yes something like that could be a risk I guess, but hard to see it would happen overnight., so you still would have the option if it came to it.

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18 minutes ago, john6767 said:

Yes something like that could be a risk I guess, but hard to see it would happen overnight., so you still would have the option if it came to it.

I think you're right, it *probably* wouldn't happen overnight, which is why I'm prepared to take the risk with my 2nd (smaller) SIPP. 

 

Governments love to tinker with pensions though so it's as well to be aware of the possibility and to keep abreast of any changes announced in budgets and spring statements in order to react quickly if necessary.

 

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2 hours ago, mrsmelly said:

Especially a boating forum!!

I commuted a lump sum when I retired so my pension has been less each year than it might have been otherwise. Its swings and roundabouts.

My wife took a lump sum when she retired and it allowed us to change our boat .

Like you this reduced the monthly pension.

taking the lump sum  was worth every penny. The way i look at it the money is  still there but in boat form.

 

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7 minutes ago, MartynG said:

My wife took a lump sum when she retired and it allowed us to change our boat .

Like you this reduced the monthly pension.

taking the lump sum  was worth every penny. The way i look at it the money is  still there but in boat form.

 

Completely agree. ya cant spend it when yer dead innitt.

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37 minutes ago, MartynG said:

My wife took a lump sum when she retired and it allowed us to change our boat .

Like you this reduced the monthly pension.

taking the lump sum  was worth every penny. The way i look at it the money is  still there but in boat form.

 

This is why it is often worthwhile getting some advice on this. Prior to retirement we had a free input from a company of financial advisers, and the advice was good. I wasn't sure about commutation versus higher pension but it was pointed out that should I do something untoward, like dropping dead, it was a substantial sum of money going begging that would be far better off in my bank account/estate than anywhere else (as has been hinted elsewhere, they don't put pockets in shrouds!). Another valid example they gave was of a person who had declined to take the commutation because he thought it would reduce his wife's widow's pension should he drop dead, apparently it made no difference to the widows pension but by the time he was told that it was too late to commute the money.

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12 minutes ago, Wanderer Vagabond said:

This is why it is often worthwhile getting some advice on this. Prior to retirement we had a free input from a company of financial advisers, and the advice was good. I wasn't sure about commutation versus higher pension but it was pointed out that should I do something untoward, like dropping dead, it was a substantial sum of money going begging that would be far better off in my bank account/estate than anywhere else (as has been hinted elsewhere, they don't put pockets in shrouds!). Another valid example they gave was of a person who had declined to take the commutation because he thought it would reduce his wife's widow's pension should he drop dead, apparently it made no difference to the widows pension but by the time he was told that it was too late to commute the money.

 

Definitely worthwhile if it is free and unbiased. Otherwise probably not unless the pension is large as the cost would be prohibitive if, as is likely, there is a (high) minimum fee rather than just a simple percentage of the pot's value.

 

The commutation/drop dead thing is worth considering for a defined benefit (company) pension. The wording of the OP's post makes me think he is referring to a defined contribution scheme, i.e. a pension pot. If that is the case then it is not a concern for the OP as the remaining pot is not lost when he/she dies, assuming it hasn't been used to buy an annuity.

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1 hour ago, Wanderer Vagabond said:

This is why it is often worthwhile getting some advice on this. Prior to retirement we had a free input from a company of financial advisers, and the advice was good. I wasn't sure about commutation versus higher pension but it was pointed out that should I do something untoward, like dropping dead, it was a substantial sum of money going begging that would be far better off in my bank account/estate than anywhere else (as has been hinted elsewhere, they don't put pockets in shrouds!). Another valid example they gave was of a person who had declined to take the commutation because he thought it would reduce his wife's widow's pension should he drop dead, apparently it made no difference to the widows pension but by the time he was told that it was too late to commute the money.

It sounds very much to me as though you are talking about a final salary pension rather than drawdown from a personal pension that the OP was asking about.  It is a very different situation, and what is a good idea for one is not necessarily good for the other,  depending on your circumstances of course.

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4 hours ago, Peter X said:

So the earlier in the tax year you draw the money, the longer you wait for a tax refund. Nov/Dec is probably a good time to do it.

Are you sure it's not Feb/March?  Month 1 for the personal tax year is usually April, but I don't know about the specific rule on the pensions, as they won't affect me for decades yet. (I'm a young codger - I have the grumpy old man thing down pat, but not the years to excuse it!) 

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3 minutes ago, TheBiscuits said:

Are you sure it's not Feb/March?  Month 1 for the personal tax year is usually April, but I don't know about the specific rule on the pensions, as they won't affect me for decades yet. (I'm a young codger - I have the grumpy old man thing down pat, but not the years to excuse it!) 

You don’t have to wait until you do your tax form to get the excess tax payments back, you can fill in a P55 at any time to claim the tax back.

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1 hour ago, TheBiscuits said:

Are you sure it's not Feb/March?  Month 1 for the personal tax year is usually April, but I don't know about the specific rule on the pensions, as they won't affect me for decades yet. (I'm a young codger - I have the grumpy old man thing down pat, but not the years to excuse it!) 

Ya dont have to be an old codger to be in receipt of a pension. A state pension yes but other pensions are available as the saying goes. Ya just have to be a spawny kiddie and get one aged 34 if the job allows it ? It was a crap job mind but the pension is awesome.

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All this knowledge is very much appreciated??

Edited by jenevers
I would also advise the OP to do a lot of homework. I know of a case where an IFA advised transfering a pension fund to another company because of the nice amount of commission thus created.
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