ihave had the pension for a lot years it is paid monthiy the lump sum is due on the 1st of December and that will be the end of it it was the pension holder co. who told me in a letter this month! ihave another small p/planof £60.02p per month plus my state pension!idont pay any tax at all !
Hi again.Take a look here for information on personal allowances for 2014/15.If you were born after 5 April 1948, you can have a tax free income of £10,000 per tax year.If you were born before 6 April 1948, you can have a tax free income of £10,500 per tax year.If you were born before 6 April 1938, you can have a tax free income of £10,660 per tax year.Some of the pension rules changed in March 2014 and will change again from 6 April 2015.It's my understanding that if you have been in receipt of a pension for some years, that you cannot "cash it in" for a lump sum as you will read here under the heading "What if I have already taken a pension income?" so you need to be careful about the tax position and should clarify it with the pension payer and/or consult an independent financial adviser before you commit to anything.Normally, when you decide to take your pension, you can take 25% in tax free cash and a smaller monthly annuity or take it all as a larger monthly annuity. Where the size of all your pension funds is small, £18,000 or less before 27 March 2014 and £30,000 or less from 27 March 2014, you have the choice to take it all as cash with the first 25% being tax free and the balance taxed with your other income for the same tax year, depending on the overall total.It may be that there is something in the pension payer's rules that allows them to pay out a lump sum even though the pension has been in payment for some years and that would be the first time I've heard of such a mechanism.You may already have taken some of the pension as tax free cash already in which case I cannot see how you can do that again. You would need to add the lump sum to your other private pension income and your state pension and if they total more than your personal allowances for the current tax year, you will pay 20% tax on the excess over and above your personal allowance.Your other private pension pays you £720 per annum. Add that to 8 months of the pension you might be able to cash in at £41 per month which would be £328 and you have total private pension income of £1,048. When you add the lump sum of £4,491, you get to an income of £5,539. If your state pension takes your income for the year above £10,000, £10,500 or £10,660 depending on your date of birth, you will pay tax at 20% on the excess.As I stated earlier, you ought to clarify the tax position as your pension payer understands it or take independent financial advice before you decide what to do as there are circumstances where a 55% tax charge can apply, though I doubt that in your case.I hope this helps but let me know if you have any further questions.