Pensions lump sum
 

If you have more than one pension do you get 25% tax free sums on both lump sums or just on whole total?

You will get a separate lump sum of 25% from each pot (assuming the pension pays 25% - some older schemes pay a higher or lower amount).

Up to about £250,000 which is about 25% of the pension lifetime allowance standing at £1.55m

Disney332

Thanks, i wouldnt think anywhere near upper limits as i work for NHS!

You missed a 0 out Disney332 it should be £1.055m

Its £1.055 million. Think you missed a zero.

In the most cases for the likes of SIPPs and personal pensions - you can take 25% of EACH pension tax free. After this you are taxed at your nominal rate. If for example you haven't had any income in the tax year you take the 25%, you can actually take a further £12,500 tax free (current tax rates).

But there are other scenarios where you can take what is technically much more - if for example your occupational scheme allows AVCs - sometimes depending on scheme rules oy can take 25% of the TOTAL pension value as tax free.

So without details, it is not really possible to answer your question.

Ooops sorry 😳

Lump sum was within a whisker thou 😂

Disney332

Taking a lump sum is whats known as a crystalisation event. At each event you use a % of the lifetime allowance, that i missed a nought off above. Ooops.

When you crystalise a sum, normally a money purchase pension pot, 25% is tax free to the extent it falls within the lifetime allowance and the remaining 75% is taxed at your marginal rate of tax if taken as an immediate income.

You can delay taking the 75% income and you can retain this as a crystalised fund if you take advantage of pension freedoms and enter a flexible income drawdown contract. This would require advice from an IFA to see if this is appropriate and to make the necessary arrangements for it to happen.

It is possible by taking advantage of the opportunities put in place under the pension freedom legislation to be very smart with the way you access your pension to the extent that tax can be radically saved or eliminated alltogether, depending on your circumstances and other incomes. The most important thing is that you do not have to take all the pension at once. Some people take many years to take their pension, some don't bother at all and preserve the fund for children.

Each action has implications, normally tax implications, and i would urge all dibbers with money purchase schemes to take advice from an IFA when they retire, so they can at least make a fully informed decision which normally once taken is irrevocable.

Disney332

Agree - if you dont fully understand what you are doing with pensions and the implications, best to seek independent financial advice. This can be well worth the cost.
And there are also inheritance implications relating to taking money form pensions. This may or may not be important to the OP (or anyone)