Taking tax free lump sum from pension age 55

[Milliemoo1908]

Hi,
i turn 55 in March 2028 and plan to take a lump sum from pension pot, can anyone advise when I would need to start the ball rolling to do this, bearing in mind the eligible age to do so is rising to 57 in April 28.
many thanks

Speak to your pension provider.

When I took mine at 57 (a couple of years ago), I think I started the paperwork (ok, pressing buttons) a couple of months beforehand.

Only your pension provider can give you accurate information as different schemes are........ different.

^ agree with this, it varies

When my husband did this 3 years ago he started the process a couple of months before But that doesn’t mean that’d work for everyone

I didn’t know they were putting the age up

Many thanks

It will not go up for those who reached 55 before the increase.

Thanks messybutfun, that was actually what I wanted to know but didn’t word my original post properly! I have contacted my pension provider but they take a little while to respond and I am being impatient hence my post 😁

It's not usually advised to to take the whole TFLS in one blow at 55, unless there is a really good reason to. No more tax free cash from your pension throughout your retirement and no tax free cash on any further savings or growth in existing savings.

I know it isn't what you asked but always worth mentioning in case you have other options!

Thanks for the advice x

I took mine a couple of years ago but it took about 6 months in total. I had to get independent financial advice. As PP said, I took the full 25% tax free and have subsequently put the remainder into a SIPP.

It's good you’ve already contacted your provider. Whilst it seems like you have a while, I found the longest wait was the initial contact.

Actually, looks like I told you the wrong thing.

it appears only some schemes with a protected pension age of 55 will allow you to still take the pension at 55 after 6/4/28 such as People’s Pension - you need to have been a member before 2021 and also public sector pensions (again).

I can’t see the logic behind it but it should not impact that many fortunately.

OP will be able to take withdrawals from her pension for 1 month - March 2028, then not be able to draw anything more for 23 months, there is no transitional arrangements (weirdly).

(I am assuming it is a DC pension we are talking about, not DB)

Why would you take tax free cash and put it into a SIPP? It was 100% tax free but now you’ll have to pay tax on 75% of it when you take it out…?

It does rather depend on your view of the impact of the double taxation of personal pensions on death after April next year though. They’ll potentially be subject to both IHT and income tax for the recipient after then. If you don’t see yourself maxing out your ISA allowance out of retirement income it could make sense to take the maximum lump sum, feed in to an ISA (which admittedly could take 13 years) where it will continue to be sheltered from CGT//Income tax on growth, be subject to IHT on death but not the subject to income tax too. On the maximum lump sum that could save the beneficiary more than £120k in income tax think. You could take it out in chunks and hope that Labour don’t change the rules on tax free amounts after you’ve started draw down, but I wouldn’t put much faith in them not fiddling with the rules…!

That's tax planning for the (fairly) wealthy, not advice I would suggest for your average retiree whose pension savings are for improving their standard of living in retirement, not an IHT planning tool.

Of course we have no idea about OP's overall financial position so perhaps your strategy is exactly what they're aiming for, who knows. It's good to ask questions and know people have thought through their decisions and options.

I am a bit concerned about the current 'trend' for making max withdrawal as soon as possible for general spends / gifting to young people / paying off debt etc. which often is a poor plan.

The remainder was put in a SIPP - not the tax-free cash. I imagine the drawdown was transferred but that’s besides the point - some older schemes don’t have the flexibility to just take tax-free cash and leave the rest invested.

If you do use your tax-free cash for new pension contributions, you will of course get tax-relief on it as long as you don’t fall foul of recycling rules and have relevant earnings.

Ah I am an idiot and misread it.