77% of savers don’t know how much they need to retire on
77% of savers don’t know how much they need to retire on Maybe you do know the value of your pension pot right now? …
Read moreCan I take 25% of my pension and still pay into it?
The 25% of my pension should be referred to as the tax free Cash (TFC), lump sum which is now known as Pension Commencement Lump Sum (PCLS).
The 25% figure is based on the value of the pension fund.
Yes, you can take tax free cash and at the same time pay into your pension. You can also take your tax free sum in stages, you don’t have to take it all at once.
Your pension fund at the time you take your tax-free cash in the background is split into 2 different pots. These are called Crystallised and Uncrystallised.
The Crystallised pot is the amount of fund used to produce the tax-free cash.
For example, if you need £25,000 then £100,000 is crystallised or set aside to produce the £25,000 payment.
Whatever amount of your pension hasn’t been crystallised will still be there to pay future tax free cash payments.
Any growth you have on the uncrystallised part, together with any further payments if made will then still be eligible to have a 25% tax free cash payment from them.
By taking your tax-free cash in combination with taxable income from your pension fund will reduce the amount you can pay in income tax, but it will have the effect of limiting the amount you can pay into your pension.
Money Purchase Annual Allowance
When you start taking an income from a Flexi-Access Drawdown (FAD), arrangement, or withdraw a pension using Uncrystallied Funds Pension Lump Sum (UFPLS), the amount you can pay into your pension is reduced.
This is called the Money Purchase Annual Allowance.
This is currently £4,000 for the tax year 2021/22. In other words you can only pay in up to £4000 per annum.
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Oaklands Wealth Management, founded by Helen Blackburn in 2004 advises clients around the Midlands on retirement planning, pensions & investments.
Her firm holds British Standard BS 8577 for client service & investment process.
Minimum investment is £500,000 (£650,000 for pension transfers).
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