Once 55, taking a series of payments.

[norris9]

Once 55, take a series of payments as you need them with 25% tax-free each time you take cash out.

Does anyone know anymore details about this option... (RMDCP)

Is there a rule on how often you can take these series of payments?


What is the benefit of doing this over just taking the whole lot?

Is the potential benefit from the 'personal allowance' the government gives everyone? which can help you 'avoid' the tax charges.

[yubin282]

Once 55, take a series of payments as you need them with 25% tax-free each time you take cash out.

Does anyone know anymore details about this option... (RMDCP)

Is there a rule on how often you can take these series of payments?


What is the benefit of doing this over just taking the whole lot?

Is the potential benefit from the 'personal allowance' the government gives everyone? which can help you 'avoid' the tax charges.

I'm in this scheme too, from what I remember you can take whatever you want to take out.

So if you want to take £240 per week (conveniently just under the personal allowance) then you can until the pot is empty.

[RobertT]

You have 4 options with a defined contribution pension when it comes to accessing your money:

1. Annuity – Take up to 25% tax free cash upfront and then convert the remainder into an income for life.
2. Drawdown – Take up to 25% tax free cash upfront and then set up regular monthly payments until the money runs out.
3. UFPLS – Similar to 2, no upfront cash but 25% of each withdrawal is tax free.
4. Total withdrawal – The first 25% is tax free.

Option 4 is likely to be the least tax efficient, as the taxable element will all be taken in the same financial year. Whereas it can be split over several years with the other options.
But it will obviously come down to the amounts involved and any other income.

If you have no other income you can withdraw an amount equal to the personal tax allowance(currently £12,570) each year free from income tax, which is over and above the 25% tax free amount.
In that scenario, it may be possible to withdraw all your money completely tax free over time.

Annuities can vary – some offer yearly increases or spouses benefits on death, while others don't. So it's important to choose one that provides the benefits you want.
It's also a good idea to shop around, as your pension provider might not always offer the best rates.

[norris9]

Cheers guys.

[norris9]

I guess the one I am interested in is called DRAWDOWN....

So, say I had £100k in my pension pot....

I hit age 55 and stop working altogether, I take 25% = £25,000 (tax free).

To avoid any taxes I'd then have to withdraw at or below the governments 'Personal Tax Allowance', which is currently £12,570 per year.

Age 55 withdraw £25k tax free.
Age 56 withdraw £12,570 tax free.
Age 57 withdraw £12,570 tax free.
etc
etc
...until it runs out.


Correct?

[freespeech]

I guess the one I am interested in is called DRAWDOWN....

So, say I had £100k in my pension pot....

I hit age 55 and stop working altogether, I take 25% = £25,000 (tax free).

To avoid any taxes I'd then have to withdraw at or below the governments 'Personal Tax Allowance', which is currently £12,570 per year.

Age 55 withdraw £25k tax free.
Age 56 withdraw £12,570 tax free.
Age 57 withdraw £12,570 tax free.
etc
etc
...until it runs out.


Correct?

Unless you have other income too then the £12570 may also be taxed.

[NorthernBoy]

I guess the one I am interested in is called DRAWDOWN....

So, say I had £100k in my pension pot....

I hit age 55 and stop working altogether, I take 25% = £25,000 (tax free).

To avoid any taxes I'd then have to withdraw at or below the governments 'Personal Tax Allowance', which is currently £12,570 per year.

Age 55 withdraw £25k tax free.
Age 56 withdraw £12,570 tax free.
Age 57 withdraw £12,570 tax free.
etc
etc
...until it runs out.


Correct?

Yes this works assuming you have no other taxable income in each year.

[RobertT]

Why wait until your birthdays?

Take the 25% at 55 and then set up monthly payments when it's the right time financially to stay tax free.

It might also be easier to manage if you're getting a monthly income rather than a chunk once a year.

[norris9]

Why wait until your birthdays?

Take the 25% at 55 and then set up monthly payments when it's the right time financially to stay tax free.

It might also be easier to manage if you're getting a monthly income rather than a chunk once a year.

yeah, i just wasn't worrying about every detail I guess.

I'd take the ~£12k tax free on the 6th April every year, not my birthday.

I'd likely take the whole ~12k at once each 6th April.

Anyway - this is 15+ years away for me and I won't be taking it at 55, as it will change to 57 for me. The state pension will probably be 70 by the time I get there, and I believe any years the state pension is increased by, that 57 will increase by the same number of years

[Jaggs]

Why wait until your birthdays?

Take the 25% at 55 and then set up monthly payments when it's the right time financially to stay tax free.

It might also be easier to manage if you're getting a monthly income rather than a chunk once a year.

yeah, i just wasn't worrying about every detail I guess.

I'd take the ~£12k tax free on the 6th April every year, not my birthday.

I'd likely take the whole ~12k at once each 6th April.

Anyway - this is 15+ years away for me and I won't be taking it at 55, as it will change to 57 for me. The state pension will probably be 70 by the time I get there, and I believe any years the state pension is increased by, that 57 will increase by the same number of years

Just one thing to be wary of doing that is that after the initial 25k that would be a pension commencement lump sum the annual 12k would come from a drawdown account and so taking 12k in one go at the start of the tax year then pension company will likely deduct income tax assuming you'd be taking that amount each month.