What is the maximum cash amount you can take from your 65 pension

[markis]

My 65 pension is only £2000 per year, what is the maximum lump sun that I can take ? I was wondering could I take the whole lot of the pension pot as cash lump sum, and what would be the consequences of doing so.

[RobertT]

It would help if you gave more info, but assuming you're in section C, the options you have are:

1. Take the full pension, using the Cash Balance as the tax free lump sum(what it's designed for). Any cash left over after the 25% tax free amount will be paid as a UFPLS.
2. Take a reduced pension, by giving up some to fund the tax free cash, with the entire Cash Balance then being paid as a UFPLS.
3. Transfer out your RMPP(2012+) benefits to a personal pension via a CETV. But only 25% of that will then be guaranteed to be tax free when you access it, with the rest being classed as income.
CETV's are very low at the moment due to high interest rates, etc.


*UFPLS – Uncrystalised Funds Pension Lump Sum. Basically the first 25% of that is also tax free.
*CETV – Cash Equivalent Transfer Value.
*It's not possible to transfer out RMSPS benefits as cash.

[markis]

Robert thanks for the reply.Yes I’m in section C. By the sounds of it it looks like I can only take 25% tax free as a lump sum. But the cash balance pot is that taxable at 20% , what I mean is can I take my 65 pension with a reduced amount and with a lump sum. If that was the case would I pay 20% on the cash lump sum, or will it be the case that I have to take my pension without a lump sum deducted from it as the cash balance is the lump sum?

[RobertT]

You can do options 1 or 2 as above!

If you take the full pension, the Cash Balance can then be used to fund the tax free cash, with anything over 25% being paid as a UFPLS.

Or you can reduce your pension to provide the 25% tax free cash, with the entire Cash Balance fund being paid as a UFPLS.

Normal income tax rules will apply, so basically any income in any financial year between £12,571 and £50,270 should be taxed at 20%.
Tax free amounts don't count as income!

Another option I forgot to mention, is that it's also possible to transfer out just the Cash Balance amount to a personal pension. When you subsequently access that, only the first 25% will be guaranteed to be tax free, with the remainder counting as income.