25% tax-free pension query

[ContractorBanking]

How does the 25% tax-free pension rule work?

Say you have 400k in the pension pot and you withdraw 100k.

1) is that 100k all tax free because it represents 25% of the entire pot?
2) or is 25% of the withdrawn amount tax free, i.e. 25k is tax free and 75k is subject to tax at the personal marginal rate?

if its 2), then I assume the 25% tax free amount applies to all withdrawals?


thanks

[WTFH]

How does the 25% tax-free pension rule work?

Say you have 400k in the pension pot and you withdraw 100k.

1) is that 100k all tax free because it represents 25% of the entire pot?
2) or is 25% of the withdrawn amount tax free, i.e. 25k is tax free and 75k is subject to tax at the personal marginal rate?

if its 2), then I assume the 25% tax free amount applies to all withdrawals?


thanks

No.
Your accountant/pension adviser can go through the details with you.

[Smartie]

How does the 25% tax-free pension rule work?

Say you have 400k in the pension pot and you withdraw 100k.

1) is that 100k all tax free because it represents 25% of the entire pot?
2) or is 25% of the withdrawn amount tax free, i.e. 25k is tax free and 75k is subject to tax at the personal marginal rate?

if its 2), then I assume the 25% tax free amount applies to all withdrawals?

thanks

In your scenario, your £100k lump sum is tax free, you've had your 25% allowance and won't get any more, ever.
You're not drawing your pension yet though, unless you take 1p more, then other restrictions come into effect.
Alternatively, take no lump sum and you get your 25% on every withdrawal so £5k on a £20k withdrawal is tax free.
Or some combination of those.
Deciding what's best for you is complicated - get professional advice.