- 15th July 2019
- Posted by: thisworksadmin
- Category: Lastest News
Pension Release – Taking tax free cash from my pension? Over 1 million people have now accessed their pensions in this way.
Should I cash in my pension? – “I am age 55 and I want to access the value of my pension while I am young enough to enjoy it!”
It became available to take your entire pension fund in one go as cash. The pension rule changed in 2015 for this. This is available from the age of 55, but there is substantial tax implication to consider beforehand.
You can close your pension pot and take your fund as cash. The first 25% will be tax-free and the rest will be taxed at the highest tax rate. This is done by adding it to the rest of your income.
Not all pension schemes, particularity workplace pensions will offer this option.
There are likely to be charges for cashing in the whole funds.
Cashing in your funds are likely to suit you if:
- You have poor health and income for life might not be the greatest option?
- You want to reinvest your money or have quick access to it?
- You have significant debts to pay?
If you were to withdraw less than £12,500 from your pension, in the tax year 2019/20 you won’t pay any tax, as long as you have no other income.
If you were to withdraw £150,000, you will pay the highest tax rate of 45%.
Say you’ve got £500,000 in a pension in 2019/20:
- The first £125,000 can be withdrawn tax-free.
- The next £37,500 is taxed at 20%. You’d pay £7,500 in tax.
- The next £112,500 is taxed at 40%. You’d pay £45,000 in tax.
- The remaining £225,000 is taxed at 45%. You’d pay £100,800 in tax.
- In total, you’d pay £153,300 in tax, leaving you with a total lump sum of £346,700.
You can take your money in a series of lump sums from uncrystallised pensions, this is funds that are not yet used to pay a scheme pension, annuity or go into a drawdown.
It has become increasingly common to access pension funds in this way. It is important to obtain independent advice for the best method to do so.