6♣ – Take up your Workplace Pension Offer

Take up your Workplace Pension Offer, Because It's Free Money

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3 Responses

  1. Harry says:

    This makes it sound like you get 25% tax free every year. Isn’t the reality that you get a 1 off 25% tax free optional withdrawal when first accessing your pension? So in your example the only reason someone would take £10.75k as their 25% tax free lump sum is if their pension pot was £43k in total, not £43k pa?

    “So if you had a big enough pension to withdraw income up to the current higher rate threshold of £43K:

    you’d pay no tax on 25% of the income (£10.75K, from the pension tax-free allowance)
    you would pay no tax on the first £11K of what remained (personal tax-free allowance)
    you’d pay 20% tax on the remaining £21.25K
    That’s £4.25K of tax on £43K of income – less than 10% tax overall.”

    • Mike Rawson Mike Rawson says:

      Hi Harry,

      The rules changed in April last year so that there are several ways of taking the money out.

      You can still take 25% out as a lump sum at 55, or you can take it out in many lumps, with the first 25% of each lump tax fee, and the rest taxed at your marginal tax rate.

      So people with with big pots can take out £43K a year and still take advantage of the exemption (or they can take it all at one if they prefer).

  1. September 17, 2016

    […] Why you should take up your workplace pension offer – 7 Circles […]

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6♣ – Take up your Workplace Pension Offer

by Mike Rawson time to read: 5 min
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