Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.
The amount of tax that will be deducted will depend how much you withdraw after 5 April 2017 and who your pension plan providers are.
Having done some research on the new pension rules and how the pension plan providers deal with withdrawals in the recent past and I can tell you that different providers have been using different approaches to how the payments are taxed. Some are using a Month 1 tax code which means that, assuming that the tax free lump sum has already been taken, then one-twelth of the personal allowance is given tax free (£11,000/12) and the balance is taxed using one-twelth of the 20% basic rate tax band (£32,000/12), followed by one-twelth of the 40% tax band (£118,000/12) with any balance being taxed at 45%. There are variations on this. I also understand that some providers will contact HMRC for tax code instructions.
I would advise you to contact each of the pension providers to find out how they will tax any sums you may take in 2016/17 on the basis that you will be a basic rate taxpayer (depending on the size of the pension lump sums you withdraw).
I hope this helps but let me know if you have any further questions.
Are you planning to take the £157,920.35 in the curent tax year, 2016/17? If so, what is your projected income for 2016/17 excluding the lump sum?
I cannot call until around 6pm. Is that OK? If not, don't accept the call charge. I'm sure we can get to the bottom of your question using the text format.
Leave this with me while I look at your last post.
The taxable part of the pension lump sum will be £118,440 which when added to your salary of £38,000 and your pension of £4,452 will give you a total income in 2016/17 of £160,892. As your income will be over £122,000, you will lose all your personal allowance of £11,000 which will cost you £4,944.60 in tax (£10,892 @ 45% + £108 @ 40%).
The tax on your salary and pension will be £10,580.80 (£32,000 @ 20% + £10,452 @ 40%). The tax on the taxable part of the pension lump sum will be £47,920.60 (£107,548 @ 40% + £10,892 @ 45%).
The figures above are what the final gross tax liabilities will be and don't take account of tax deducted at source from your salary, pension and taxable pension lump sum.
As I said in my earlier post, different pension providers are taxing pension lump sums in different ways. If your pension provider uses a 1100L Month 1 tax code, the tax deduction at source will be £51,726.95 (£917 @0% + £2,667 @ 20% + £9,833 @ 40% + £107,023 @ 45%). That will be excessive by £3,806.35 (£51,726.95 - £47,920.60) but there will be an underpayment of £4,944.60 on your salary and pension due to the loss of the personal allowance which was mentioned above.
If you take the tax free lump sums only in 2016/17, they won't count as income in 2016/17 as they are tax free.