Taking my whole defined benefits pension at 55: how is tax handled?

[Kevinbaconsrealwife]

Evening wise women of MN…..for a million different reasons I’ve decided to take 100% of my defined benefits pension next year when I’m 55… I’ve read all the pitfalls, taxation etc etc but as I say for more reasons then I can mention here it would be a much better bet for me and DH…..

Has anyone done this please? My pot Is just £60k , so the first £15k is tax free ( I’ve checked this today) and I understand the remaining 75% or £45k will be taxable…..do I pay that all in one go as my “ income “ for the tax year 2026 will be £72k , so 40% tax over the £52k allowance, or will the money be taken monthly in the form of a lower tax code for me?

real life stories appreciated…..please and thank you…

NB….i WILL be taking the whole lot at age 55….just some advice on the hows and whys would be fabulous thank you x

Assuming it isn’t due to serious ill health (less than a year to live) then yes, it will all be taxed as income in the year you take it, on top of any other taxable income you receive.

I’d be surprised if any DB scheme lets you do this without first transferring out, though.

Can you take half before the end of March 2027 and the other half after the start of the new tax year?

Thank you both so much….ive looked more thoroughly into it and as its a USS defined benefits pension I don’t think I can take it all…😞even though I already have a guaranteed lifetime pension I’m in receipt of from my late first husband…x

Sounds like you mean defined contribution?

Can you spread it over a couple of tax years to stay below the 40% level and save tax?

Ah, cross posted. No, you can't take it in one go if it is DB without taking advice and most reputable IFAs won't advise because it's almost always a bad idea so they won't advise on the situation.

Thank you, thing is without being completely outing for me it would most definitely be the best thing for me…..I already have a lifetime guaranteed income nd a decent earning second ( and final !!!) DH….so for me the cash would be better than a minute amount every month …

Bump for anyone else with info or advice …please and thank you x

It almost certainly is a bad idea. But I wonder if you could transfer it to a DC scheme then you could take it in one go. If possible I’d spread it over a few tax years to avoid 40% tax.

Thank you x

If you're determined to do this, the law requires you to take professional advice so no-one can give any more information especially as we don't know your circumstances that mean you'd be one of the minority where it would be a good choice, which it could be if you have other pension income, have specific circumstances that mean you need a lump sum now but are not able to borrow it, which could be more cost effective.

https://www.thepensionsregulator.gov.uk/en/document-library/scheme-management-detailed-guidance/administration-detailed-guidance/db-to-dc-transfers-and-conversions

You talk about a ‘pot’ and it being defined benefit. You don’t have a pot with a defined benefit pension although you can take some tax free. Do you mean defined contribution?

If it is a defined benefit pension, it will be extremely difficult to find someone who will recommend that you cash this in. They will only recommend this in very specific circumstances (and will charge an hefty fee) and the commutation rate is not great.