take and then reinvesting tax free pension lump sum
Discussion
If you are just over the old LTA and so your TFC is maxed, there is an argument for doing this, for the simple reason that if the market goes south and your pension drops significantly, your TF portion will also drop, and it might be several years before it recovers back up to the max (or may never do, or the allowance might be decreased in the meantime).
There is little chance the £268k will increase after all.
You can use this lump to supplement your annual income over the years just as you would have done by crystallising in stages.
There is little chance the £268k will increase after all.
You can use this lump to supplement your annual income over the years just as you would have done by crystallising in stages.
Clad-Hach said:
I am due to get my TFLS in December, I was in with my IFA this morning to discuss what to do with it...and she suggested a GIA.
So that's what I am going with as its slightly more tax efficient, CGT 18% vs income tax 20%.
Bless.So that's what I am going with as its slightly more tax efficient, CGT 18% vs income tax 20%.
Quoted so that we can all look back at how things used to be.
Before 28/10/26.
OIC said:
Clad-Hach said:
I am due to get my TFLS in December, I was in with my IFA this morning to discuss what to do with it...and she suggested a GIA.
So that's what I am going with as its slightly more tax efficient, CGT 18% vs income tax 20%.
Bless.So that's what I am going with as its slightly more tax efficient, CGT 18% vs income tax 20%.
Quoted so that we can all look back at how things used to be.
Before 28/10/26.
ds666 said:
If your pension tax free amount is at the max (c£268k), does it make sense to take it out and reinvest over several years into ISA's ( start in GIA , take £40k out every year into ISA) , thereby growing the effective tax free element of your pension?
TIA
MJohnson said:
I thought the consensus was if you didn't need it immediately / had a few years of ISA/CASH already and not withdrawing due to concerns around the 25% rules changing etc then it was best to leave it investing withing the pension wrapper ?
I think it all depends. Leaving it alone makes more sense when you are significantly under the £268k, then you will gain from letting your pot grow over time and ultimately being able to take more money tax free as the 25% portion gets bigger in terms of £s. This is why phased drawdown can make sense, just taking 25% PCLS based on what you need to live on each year can be really tax efficient and leaving the rest intact.If you're already at £268k then you might want to take out PCLS more rapidly to gradually put into Stocks and Shares ISAs.
WayOutWest said:
I think it all depends. Leaving it alone makes more sense when you are significantly under the £268k, then you will gain from letting your pot grow over time and ultimately being able to take more money tax free as the 25% portion gets bigger in terms of £s. This is why phased drawdown can make sense, just taking 25% PCLS based on what you need to live on each year can be really tax efficient and leaving the rest intact.
If you're already at £268k then you might want to take out PCLS more rapidly to gradually put into Stocks and Shares ISAs.
If you already have the maximum then it would make sense to take it as it's difficult to make an argument for this ever being increased.If you're already at £268k then you might want to take out PCLS more rapidly to gradually put into Stocks and Shares ISAs.
If you have a pension that's already that large it's probably you will be paying income tax on the growth achieved.
Even with the current government seeming to be open to the idea of increasing capital gains tax it's unlikely that CGT will outstrip income tax.
Clad-Hach said:
I am due to get my TFLS in December, I was in with my IFA this morning to discuss what to do with it...and she suggested a GIA.
So that's what I am going with as its slightly more tax efficient, CGT 18% vs income tax 20%.
What does that mean? A GIA isn't a thing, it's just the trendy branding for not using a tax wrapper and leaving the capital in the normal environment. And whether there is a CGT liability or an income tax one is then down to what you invest in. So that's what I am going with as its slightly more tax efficient, CGT 18% vs income tax 20%.
ds666 said:
If your pension tax free amount is at the max (c£268k), does it make sense to take it out and reinvest over several years into ISA's ( start in GIA , take £40k out every year into ISA) , thereby growing the effective tax free element of your pension?
TIA
It also depends on what you want to invest into as to which wrapper is best or whether one is needed.
Plus, given the current elevated market risks, for the first few years you won't be using up your personal CGT allowance so a tax wrapper may not be required plus if the market were to fall you can book capital losses to carry forward if outside of a wrapper etc.
LeoSayer said:
Using the tax free cash from a pension is only one aspect of pension tax efficiency.
Are you taking any income from the pension? With a pension that size it will be hard to avoid higher rates of income tax if you let it grow.
Still working and not taking anything from the pension - but we don't use our ISA allowance, so seemed sensible to draw down the tax free element and reinvest in isa's . Think I'll do this over the next 5/6 years . Are you taking any income from the pension? With a pension that size it will be hard to avoid higher rates of income tax if you let it grow.
DonkeyApple said:
Can be a good time to pass money to a partner if they haven't yet started to draw on their pension and have allowance capacity as the money you pay in to that pension instantly claws back all the income tax.
In hindsight (now retired) we should have done more of that. I did whack the last couple of years of wife's entire salary into a SIPP (which gets tax bump-up even on the part she didn't pay tax on) but should have started earlier.Now retired, she's got a chunk of 20% headroom that's being wasted.
DonkeyApple said:
Clad-Hach said:
I am due to get my TFLS in December, I was in with my IFA this morning to discuss what to do with it...and she suggested a GIA.
So that's what I am going with as its slightly more tax efficient, CGT 18% vs income tax 20%.
What does that mean? A GIA isn't a thing, it's just the trendy branding for not using a tax wrapper and leaving the capital in the normal environment. And whether there is a CGT liability or an income tax one is then down to what you invest in. So that's what I am going with as its slightly more tax efficient, CGT 18% vs income tax 20%.
Is it not a good option…if not please tell me how, and I will run it past my IFA.
Clad-Hach said:
It was an option suggested as I would be drawing this money down to live on leaving my main investments alone.
Is it not a good option if not please tell me how, and I will run it past my IFA.
I think all DA is suggesting is that the suggestion of a GIA is not exactly rocket science from your IFA and in fact is more " IFA 101 " in terms of what they usually suggest especially from a tax mitigation view.Is it not a good option if not please tell me how, and I will run it past my IFA.
ISA's , Premium Bonds , IIB's and then tax relief schemes such as EIS and VCT usually get first mentioned and then when they have run out of ideas it's back to the General Investment account or Unit Trusts or Investment Trusts.
If your SIPP is at the £1million + level and you're 57 or older, then you really should be taking the money out, even if you don't actually need it.
TFLS - take it all - NOW.
Money to take you to the top of the 0% band - take it - starting now, and every subsequent year (State pension will disrupt this)
Money to take you to the top of the 20% band - take it - starting now, and every subsequent year.
Unless there is some massive market correction that takes decades to recover from AND your SIPP is invested purely in equities, then you will not be able to spend all of it without paying tax at 40% on a significant chunk.
Get the money out of your £1million+ SIPP as soon as you are able and have more control over it.
TFLS - take it all - NOW.
Money to take you to the top of the 0% band - take it - starting now, and every subsequent year (State pension will disrupt this)
Money to take you to the top of the 20% band - take it - starting now, and every subsequent year.
Unless there is some massive market correction that takes decades to recover from AND your SIPP is invested purely in equities, then you will not be able to spend all of it without paying tax at 40% on a significant chunk.
Get the money out of your £1million+ SIPP as soon as you are able and have more control over it.
omniflow said:
If your SIPP is at the £1million + level and you're 57 or older, then you really should be taking the money out, even if you don't actually need it.
TFLS - take it all - NOW.
Money to take you to the top of the 0% band - take it - starting now, and every subsequent year (State pension will disrupt this)
Money to take you to the top of the 20% band - take it - starting now, and every subsequent year.
Unless there is some massive market correction that takes decades to recover from AND your SIPP is invested purely in equities, then you will not be able to spend all of it without paying tax at 40% on a significant chunk.
Get the money out of your £1million+ SIPP as soon as you are able and have more control over it.
Interesting.TFLS - take it all - NOW.
Money to take you to the top of the 0% band - take it - starting now, and every subsequent year (State pension will disrupt this)
Money to take you to the top of the 20% band - take it - starting now, and every subsequent year.
Unless there is some massive market correction that takes decades to recover from AND your SIPP is invested purely in equities, then you will not be able to spend all of it without paying tax at 40% on a significant chunk.
Get the money out of your £1million+ SIPP as soon as you are able and have more control over it.
Why would you take it all out NOW if you can only invest £40k year on year in an ISA between a couple.
Where would you advise investing the remaining £228k if removed now as tax free money from SIPP.
Not saying it is wrong just interested on the tax efficient investment strategy with the high value tax free money.
omniflow said:
If your SIPP is at the £1million + level and you're 57 or older, then you really should be taking the money out, even if you don't actually need it.
TFLS - take it all - NOW.
Get the money out of your £1million+ SIPP as soon as you are able and have more control over it.
I did this but because I didn't want to take the risk that Labour were going to screw with it as I had decided to use it for my children's early inheritances towards their house purchase funds.TFLS - take it all - NOW.
Get the money out of your £1million+ SIPP as soon as you are able and have more control over it.
At the time ( just before they won the GE ) my FA said he had 9 clients looking into this of whom 2 others did what I did.
However just taking it without a plan maybe needs a bit more thought ?!
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