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History: Home UK Divorce Forum
pension sharing how is the money drawn out (4 Posts)
Started By:
22 February, 2017 11:49AM
pension sharing how is the money drawn out
karenlr - 22 February, 2017 11:49AM
Hi . im still battling on with my divorce and wanted to ask a question as i cant seem to find a direct answer on the internet
and my own solicitor is in court
my solicitor is pushing me to pension share my husbands pension however as there is an outstanding mortgage
on the house and should i be in the position to be given it
i will need a cash lump sum to clear the mort as i am coming out
of the family business i work in with my soon to be ex husband
and so will have no income stream for a while until i get back on my feet. if i take a lump sum from the pension sharing pot
i.m asuming it doesnt come to me in the form of cash but gets put in a pension fund which i will have to set up as my husbands co do not allow for ex spouces to have one with them
so that said am i correct in stating. that as i have a tiny pension with a co
could i transfer it straight into that?. if so is there usually a charge and more importantly can i then draw the money out
what ever the sum is i will need all of it as i said to clear the mortgage...im 55 so can i draw a lump sump of it tax free...
how would i get the rest out and what would the tax consequences be
Re: pension sharing how is the money drawn out
Andyk - 22 February, 2017 12:24PM
If you get the Pension Sharing paid into a pension in your own name, as you are over 55 you can usually take up to 25% of this as a tax free cash sum, anything over that and it will count as income and you will have to pay tax on it at your marginal rate. You will need to be careful if you also pay into any other pension schemes as taking more than the tax free element will trigger the Money Purchase Annual Allowance which limits your pension contributions to £10k per year, it is like that this will reduce to £4k from April 2017.
Re: pension sharing how is the money drawn out
karenlr - 22 February, 2017 12:33PM
Hi thanks for your reply... i dont pay into any other scheme
i have a very tiny pension account thats just sitting there
i have checked and it can be pd into it although they charge
me 3% for the advice to do so!
i had heard about the tax free sum and the left over amount being subject to tax. what is meant though at your marginal rate?
i hope to be back up and running again so to speak and working
so of course then my personal allowance would be used up
in that way is that correct??
Re: pension sharing how is the money drawn out
Andyk - 22 February, 2017 12:52PM
Basically if you took out all of the fund and for example £5k was tax free, the remaining £15k would be taxed as income. If you dont earn anything in the tax year then the first £11k would be tax free and you would pay 20% tax on the remaining £4k.

If you do ave any income in the tax year then the £15k would be added to that, so if you earn £11k you will have used up all of your allowance and that £15k will all be taxed at 20%. if you earned more then yopu might find that some of that £15k would tip you over into the 40% tax bracket.

Generally the provider would tax the payment at a PAYE emergency tax code, so it would assume that the £15k they are paying you is earned every month so some would fall into the tax free bit, some would fall into the 20%, some 40% and some the higher rate. They will report this to HMRC and send you a P45, it will then be down to you to claim any overpaid tax back, or HMRC could come to you if they thin you need to pay anymore.

it all seemed so easy when George Osborne said you could cash your pension pot out !!!!!!!
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