Frequently Asked Questions...
If you’re looking to cash in a defined contribution pension that’s worth over £30,000, you legally have to seek financial advice.
However, it’s always good to meet with a pension adviser to get expert advice regardless.
When taking a lump sum from your pension pot, you can withdraw 25% tax free. Income tax is paid on the remaining 75%.
The amount of pension tax-free cash you withdraw doesn’t affect your Personal Allowance.
The rules for withdrawing a tax free lump sum vary dependant on your pension scheme. If you are over the age of 55, you can take up to 25% of a defined contribution (DC) pension tax-free. Cashing in pension lump sums is more complex if you have a defined benefit (DB) pension, also called a ‘final salary’ scheme.
Speak to a pension adviser to get expert advice.
You can withdraw up to 25% of any pension as a tax-free lump sum without affecting your Personal Allowance.
For example, your pension is worth £60,000. You withdraw a tax free lump sum of £15,000. Your pension provider takes tax off the remaining £45,000.
A pension advisor will be able to help you with your pension calculations and assess the best option for your circumstances.
Pension tax free lump sums can be withdrawn from 2 separate pension pots and at different times. Withdrawing 25% tax free cash from one pension, shouldn’t affect your ability to withdraw 25% from another pension pot at a later stage.
These questions are a good starting point:
- If I claim my pension, will it affect by state benefits?
- What are safeguarded benefits?
- What options can you attach to an annuity?
Advisers will typically charge between 0.5%-2% of the asset in question. Your adviser will always be up front and honest about their fees so there won’t be any nasty surprises later. There is no fee for your Pension Review.