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By Mike Freer of BWCI
A READER has got in touch to say that they are confused about how much cash they can take out of their pension.
A friend has told them that they can withdraw all the money but they have read somewhere that they can only take out 30%. They have asked which information is correct.
For 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%.
