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
Need Pension Advice?
Call us on 02084327333
First Name
Phone
Email

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.

retirement planning
 
pension tax free lump sum
 
pension tax
 
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.
Start your journey today...
  Find out how a Drewberry financial adviser can help you reach your destination by making the most of your finances.
Call us on 

Frequently Asked Pensions Advice Questions

 
I’m a bit worried my private pension fund won’t last long enough, how do I prevent it...
 
I have an old pension with a former employer – should I consider transferring it to my...
 
I took time out of work to be a full-time mum. I’m back to work now my children are older, but...
 
I’m now working overseas but plan to return to the UK at some point in the future. Am I still able...
Need Help? Live chat now and get an instant answer from our Experts...

Neil
Pensions

Victoria
Insurance
Our Latest Reviews
Kevin Paul
05/09/2017

Excellent service renewing our medical insurance, professional advice, good rates found and excellent professional after service, highly recommended.

Max Edgar
09/09/2017

Nadeem was brilliant. He was very patient and worked very well with me to come up with the best solution possible for my budget. Perfect solution. Thank you very much.

Aidan Smyth
11/09/2017

Dealt with me promptly and provided me with the most cost-effective option consistent with my requirements. Very pleased and thank you.

We are rated 4.9/5 based on 1129 independent client reviews.
To read more of our independent client reviews click here →
REVIEWS
EXCELLENT
4.93 / 5 Average
1,224 Reviews
Anonymous
Overall Rating
Mine was not a straightforward case, but Steffan was first class in everything.
L W
Overall Rating
Sam was extremely knowledgeable and helpful.
A
Overall Rating
Really, really helpful! Stopped me from signing up with an unhelpful company, and did basically all of the legwork for me in signing up with the right one. I can't have been the most helpful client as I'm 19 and only just started looking into it last week, but he took all the questions in stride! Put up with me turning to ask my dad questions every 2 minutes as well. I was helped by 2 workers; Sam and Nick. Thank you very much to both!
L Finch
Overall Rating
Good communication and follow ups. Friendly. A thorough research for my insurance needs.
M
Overall Rating

Sam Barr-Worsfold was very helpful and provided excellent customer service. Sam discovered I was paying too much premium for my current cover. Sam recommended and helped moved to a new cover with lower premium that provided the level of cover (terms required stated in the provider's policy) I wanted. I recommend highly recommend Sam and Drewberry Insurance. Thank you Sam.