Pension draw down and tax free allowance

Axe_meister · September 2023

I know we can take out £250k tax free out of your pension pot when you retire.
What if you don't take out the tax free allowance? Do you get a certain percentage tax free every year, or tax free until you have paid yourself £250k?

TTony · September 2023

Axe_meister said:

I know we can take out £250k tax free out of your pension pot when you retire.

Only if your pot is worth £1m.

You can take 25% tax free (with some limitations), not a specific £amount.

tone1 · September 2023

Axe_meister said:

I know we can take out £250k tax free out of your pension pot when you retire.
What if you don't take out the tax free allowance? Do you get a certain percentage tax free every year, or tax free until you have paid yourself £250k?

But what if I don’t want you to take £250k out of my pension pot?……

Roland · September 2023

I think it depends on the pension scheme. HMRC allow you to take up to 25%. Some schemes allow you to take the 25% in stages. Some only allow a one off.

spark240 · September 2023

tone1 said:

Axe_meister said:

I know we can take out £250k tax free out of your pension pot when you retire.
What if you don't take out the tax free allowance? Do you get a certain percentage tax free every year, or tax free until you have paid yourself £250k?

But what if I don’t want you to take £250k out of my pension pot?……

The dont take it...what's the issue ?

rsvmark · September 2023

I believe that once in draw down, you can take chunks of tax free exactly as you suggest. So let’s say you draw down £50k and have not taken any tax free lump sum, you can take say £12.5k of that tax free. Or, if your pot is worth £1m, you could take the first 5 years at £50k per year totally tax free. Not sure how it works though. Hopefully someone will be along to explain further

Sporky · September 2023

spark240 said:

tone1 said:

Axe_meister said:

I know we can take out £250k tax free out of your pension pot when you retire.
What if you don't take out the tax free allowance? Do you get a certain percentage tax free every year, or tax free until you have paid yourself £250k?

But what if I don’t want you to take £250k out of my pension pot?……

The dont take it...what's the issue ?

I believe tone1 was cracking a funny based on the ambiguity if the wording of the bold bit of the quote.

RandallFlagg · September 2023

Take note the impact of crystallising your defined contribution pension into a drawdown account, it's worth reading up or taking advice on it.

Whatever amount you want to drawdown as a tax free lump sum, up to 25% of your total pot (but it can be less), then 75% of that amount will be moved into drawdown at the same time and this 75% will be subject to your personal income tax coding when it is drawn down.

You can choose not to draw the 75% immediately and just take the 25% but any growth on the 75% that has been 'crystallised' will also be taxable when it is drawn (assuming you invest the 75% for growth).

Money left in the uncrystallised pension side can continue to grow in a tax free environment, thereby over time you could get more money out tax free, as 25% of every crystallisation event can be taken tax free.

suspiciousminds · September 2023

I’ve done a couple of drawdowns on a pension over the last 12 months.
Book an appointment with pension wise, mine was free, lasted about 45mins.
All the pension jargon was mindblowing but i wouldnt have had a clue without their help.

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Pension draw down and tax free allowance

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