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A READER has got in touch to ask how much cash they can take out of their pension.
Having been told by a friend that they could withdraw the full amount, they then read that they could only take out 30%, and have asked for clarification.
Perhaps slightly confusingly, in the case of Jersey-approved pension schemes both are correct, but only in certain circumstances. It depends on how old you are and the size of your pension pot. Here is an overview.
You must check with your pension administrator, as different combinations of lump sums may affect the tax payable, as this is a complex area of the income tax law.
Assuming that you are not in serious ill health, if you are under 50 then the only lump sum option available would be for pension funds of up to £10,000. These can be taken all as cash and are taxed as income.
If you are aged between 50 and 75, then you can take up to 30% of your pension fund as a tax-free cash payment, regardless of the size of your pension pot. The final option only applies if you are over the age of 60. You can cash in a pension pot of up to £50,000 in full. Of that, 30% is tax-free and the rest is taxed at 10%.
