Why did I pay tax on my private pension lump sum?

I have drawn a lump sum out of my pension and I have been told that I need to pay tax on the money drawn from my pension, is this true?

Question asked by Henry Evans
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Answered by Andrew Jenkinson

Only the first 25% of your pension can be taken as a tax-free lump sum.

If you want to take out more than this as a lump sum, then any surplus will be taxed at your marginal rate of Income Tax.

If you want to take money out of your pension gradually, then the first 25% of each withdrawal you make will be tax-free, and the rest again will be taxed at your marginal Income Tax rate.

This only applies to cash taken after the age of 55. If you liberate funds from your pension before the age of 55 there could be a 55% tax charge.

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This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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