Funds Insider - Opening the door to funds

Welcome to the Citywire Funds Insider Forums, where members share investment ideas and discuss everything to do with their money.

You'll need to log in or set up an account to start new discussions or reply to existing ones. See you inside!

Notification

Icon
Error
Can I take 100% of my small pension tax free?
+ Reply to discussion
Options
happyhippydad
Posted: 09 December 2024 13:08:20(UTC)
#1

Joined: 16/06/2020(UTC)
Posts: 7
I'm 52 and can take my vanguard pension at age 55.
It's a very small amount. it will be approx £30'000 by age 55.
I'll still be working at the time and will earn roughly £40,000 the year i want to take that £30000 pension pot.

My question is can I take out the whole £30000 tax free, or will it just be 25% of it that is tax free?

I realise it is usually 25% that is tax free as a lump sum, but the reason I am asking this is because I'm assuming there must be a figure where it becomes 100%? The reason i think this is because lets say you have a pension pot of £500. (I have used a silly figure just to reinforce my point.) Would you still only be allowed 25% of the £500 as a tax free lump sum?

Is there a figure that you are allowed to take 100% lump sum tax free?

Thanks :-)
Back to top Quote
Chalky W
Posted: 09 December 2024 13:16:35(UTC)
#2

Joined: 02/01/2020(UTC)
Posts: 364

Thanks: 2970 times
Was thanked: 1030 time(s) in 283 post(s)
'Small Pension Pots' of up to £10k can be taken in one go, but are still subject to only the 25% being tax free.

There are other conditions where small pensions can be taken:
See here: https://www.gov.uk/tax-on-pension/tax-free

Back to top Quote
2 users thanked Chalky W for this post.
happyhippydad on 10/12/2024(UTC), LongJohn on 10/12/2024(UTC)
Nigel G
Posted: 09 December 2024 13:19:28(UTC)
#3

Joined: 03/07/2014(UTC)
Posts: 442

Thanks: 86 times
Was thanked: 708 time(s) in 309 post(s)
I believe the 'small pot' lump sum only applies to pensions up to £10,000, although you can apply this to three different personal pensions. In any case, only 25% will be tax free.

https://www.gov.uk/tax-on-pension/tax-free
Back to top Quote
2 users thanked Nigel G for this post.
happyhippydad on 10/12/2024(UTC), LongJohn on 10/12/2024(UTC)
Jasper40
Posted: 09 December 2024 13:24:19(UTC)
#4

Joined: 10/03/2016(UTC)
Posts: 52

Thanks: 130 times
Was thanked: 88 time(s) in 39 post(s)
I don’t believe you are able to take this amount totally tax free and in three years time it could be worth more / less? I would suggest you contact Pension Wise for advice. There is a link to it through Citizens Advice site, just ensures you are not contacting a similar sounding site if trying through google.
Back to top Quote
2 users thanked Jasper40 for this post.
happyhippydad on 10/12/2024(UTC), LongJohn on 10/12/2024(UTC)
D Bergman
Posted: 09 December 2024 15:01:06(UTC)
#5

Joined: 22/03/2018(UTC)
Posts: 1,308

Thanks: 1686 times
Was thanked: 3536 time(s) in 1035 post(s)
The information you've received from other posters regarding the 25% tax free amount is correct.

This may be obvious, but if you're earning about £40K pa as stated, you'd be better off taking the rest of the pension in 2 or 3 lump sums, in different fiscal years, to avoid a marginal tax rate of 40%.
(assuming you have no other sources of taxable income, of course).
Back to top Quote
2 users thanked D Bergman for this post.
happyhippydad on 10/12/2024(UTC), LongJohn on 10/12/2024(UTC)
+ Reply to discussion

Markets

Other markets