Hello. Im 41 and about to retire on medical grounds (MS) in april (after the tax year for 2017/2018 closes) from a job ive had for 20years. I have 2 teenage children and a husband! My pension allows me to take a lump sum and an annual pension. But HMRC want to tax me which would equate to just over £58k. I can get the pension provider to pay HMRC which would mean i receive £7k less in a pay out and also my annual pension would be reduced by about £1k per year. I could pay HMRC myself which would mean i receive £7k more as a lump sum and over £1k more per year annual pension. What i would like to know is if i opt for the pension provider to pay HMRC am i still liable to pay tax to HMRC on my lump sum? Which option would you choose? I am a 40% tax payer currently but will only be a 20% tax payer once I start to receive my annual pension.
You are allowed to take 25% of your pension pot as a tax free lump sum. As another poster says. This is just the rule for everyone. AFAIK. I don't think there's any way round it. I think most people take the maximum tax free amount whatever that amount is (25% of the whole pot) that is and then the rest as their pension.
You could try contacting these Pensionwise people. Which is a government run scheme AFAIK. They aren't allowed to give advice on best investments for pensions and so on but I think they might help you decide what's best financially in your position as regards this tax issue.
Thanks everyone I can confirm that the lump sum will be tax free if the pension provider pay the tax, resulting in me receiving £7k ish less in lump sum and less than 1k per annum pension. So im sorted now. Thanks again