Pension Withdrawal Query

[talkingdeadscot]

Hi, can anyone answer a question please?

I'm leaving my husband so I need somewhere else to live. We have enough in our pensions to buy a small property and wondered if it was possible. Can we just cash in our pensions and use the money like that or does it have to be an annuity/drawdown? We're 59 and 62 btw.

I think I read somewhere that the first 25% is tax free then the rest is taxed but I can't find that info now.

Thanks

You can access money from your pension pot as you are over 55. You're right that the first 25% is tax free.

Therest would be taxed at your usual rate of tax as it would be added to your annual income so the total annual income includes your pension and treated the same, regardless whether you take it all as a limp sum or in smaller amounts drawn down over time.

Anything over your personal allowance (after the 25% tax free) will be taxed at your normal rate.

Speak to your pension company. You might have to move the pension into a different sort of arrangement if you want to access the money via 'draw-down'. If you want to take the lot you probably don't have to move it to a different vehicle, just fill in a form to withdraw it to set it in motion.

@thisgardenlife

Thank you, that certainly makes things a lot easier!

Just be aware that taking the whole lot as cash in one go may push you into a higher tax band, so you may end up paying tax at a higher rate.

You’d also need to think about how you’re going to fund your retirement if you’ve used your entire pension for this purpose …