6 Reasons Why You SHOULD Take Your Pension TAX- FREE CASH

Last week I did a video called Five Reasons NOT To Take Your Pension Tax-Free Cash. Fair to say, that one went down pretty well, and there were lots of calls for the flip-side to that - reasons why it DOES make sense to take the cash. So, let’s get into it.

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#taxfreecash #retirementplanning #ukpensions

Chapters:
00:00 Welcome
00:28 Intro
00:35 Reason 1 - You need cash now/debt payoff
01:45 Reason 2 - DB commutation
03:30 Reason 3 - Your split between pension and non-pension is uneven
04:47 Reason 4 - LTA mitigation
06:37 Reason 5 - Income tax mitigation
08:05 Reason 6 - Beneficiary Considerations
09:15 Resolution

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📫 Leave me a comment below - I read all of them and love hearing from you!

[MeaningfulMoney]

Hope you've enjoyed this video - let me know in the comments. And if you are wondering why you might NOT want to take your pension tax-free cash, consider my previous video:

[LauraSommer]

I'm tempted to take the tax free lump sum in case a future government takes this option away in future

[seaddipper]

Just ordered your book The Meaningful Money Handbook Looking forward to reading it.

[pipins]

Retire time guys spend your money while you have your health, no good having a higher monthly payment if you cannot get out the house

[dwinpenny]

When we were dealing with an estate we found that the maximum tax free lump sum had been taken, so reducing the pension in payment. However, the survivor benefits/widow's pension were based on the original sum, which was nice surprise. So sometimes taking more cash isn't a bad thing for survivors depending on the scheme.

[tonykelpie]

Absolutely right that everyone needs to analyse their own situation. One small point you missed is utilising the 7 year period for PET to reduce IHT; for the few who are very well provided for this can help ( as can giving from spare income- an efficient form of IHT reduction for the fortunate )

[porschecarrerascabriole]

Take the money! You may not need all 25% but I believe we will be the last few allowed to get 25% tax free on entire pot. Government will introduce threshold (heard 400k pot) that will allow you just 100k tax free.

[Isabel-ofwq]

Pete these are so helpful! Thank you! Do you have specific resources for British expats with private uk pensionpots?

[Autonomous]

I've just retired at 55.
I took the tax free lump sum for one reason.
I'm single and bought and paid off my home. I paid everything myself but in doing so I basically lived month to month and never had any savings at all.
I took the lump sum as I finally have something to fall back on.

[hotlush]

Not going to work for everyone but my plan it to take the tax free when I hit 55.

If I don't mess up how I use/invest the money ;) the reasons are
1) Puts me in a position to reduce my mortgage, significantly, and potentially paying it off a lot earlier.
1.1) The money I save from clearing the mortgage is, potentially, more than the return I can expect between 55-67 on the pension so I may actually be slightly better off taking it.
2) Allows us to get ready for retirement (house upgrades, etc.) without leaving them all until I'm retired.
3) Can actually live now, instead of getting by, until retirement.

In terms of actual retirement I should still be comfortable from my projected pension, and arguably fall in to "well off".

[rodbowes]

This was really helpful and as clear as this complex subject can be! Something that you didn't mention specifically is life expectancy - if your health is such that you don't expect to live long in retirement then taking the maximum tax free money up front may also make sense.

[Simon-rylw]

The one intangible in all this - how long will you live and how long will you live with good health to enjoy the fruits of your labour ?

[Jeffybonbon]

Just recived some tax free cash this morning I am effected by S24 and the tax free income dosent make me worse off I am staying fully invested and just takeing what I need per month I also own a company so my company will be paying more cash into my SIPP Pensions are great and you dont really know how good they are untill some cash comes into your account month after month

[GreenStreetPlayer]

Thanks. A question on number 2. If you took tax free cash out of your db pension to buy an annuity, at some point does the returns on that annuity qualify or come into paying tax equations?

[andrewkingdon]

I think one really good reason to take all of your tax free amount (your own personal max amount) is because it's done, you can drip feed it into ISAs etc. And once it's done labour can't reduce the amount you can take as you have already taken it. you can still draw down your non tax free cash up to the £12500 tax free income level and use some of the invested cash tax free withdrawal you made and, in effect, pay no tax on either amount.

[mnukcyv]

What difference % growth would it make to turn off my life styling on my pension at 60yrs old on an 100k pension?

[ianlewis]

The problem with taking cash is in a few years it's gone and forgotten.
But leaving it in your pension in 10 or 20 years you will still be getting that extra pension and the yearly increase is more .

[janethomson]

I am 61 and wish to take early retirement. I have worked at the same higher education institution all my life, and been paying into the LPF since 1980. Do I have any protection regarding what was Rule 85, which existed until 2006?

[adam]

I have to get financial advice in order to get my private pension even though I know I want to take full pot amount. Do you know how much this is am UK. The form that has to be sent back to Royal London has to be filled in by Financial Advisor with their accreditations and numbers on it.

[kkaybrunel]

Can you please tell me if I have to take my pension lump sum at the age of 60 with my post office pension and can differ my pension