Isn't the €500K max lump sum at 20% staying the same though?
De-risking Assets Before Pension Draw Down
- Thread starter LiferT
- Start date
It's not so long ago that the entire pension lump sum was tax free.
The confusion is caused by the "pension lump sum" incorrectly being called the "tax free lump sum". It used to be that it didn't matter because all of the pension lump sum was tax free and the annuity/AMRF requirement helped distinguish a post retirement draw down from the pension lump sum. People just need to be more careful to use the correct terminology to prevent confusion.
This is not correct. You can take either 25% of the fund or whatever the amount calculated on salary and service is. There is no 500k limit on the pension lump sum. 500k is just relevant to the tax treatments of different parts of the pension lump sum.
There also seems to be some confusion over 1.5 times salary and 25% of fund. Same tax rules apply to both.
This is all wrong
Yes.
Setforlife
Registered User
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For some reason, you didn’t quote the bit where I said with a 2 million pension you can take up to 500k as your lump sum, which would make it correct. in the same post I said you could take more as a lump sum if you have over 2 million pension and it’s taxed fully. Which for some reason you also didn’t quote.
It being 25% of the SFT was never explicitly stated....
CharlieMac
Registered User
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The other bit of detail is any amount over the SFT gets a double charge of 40% or so I read. You get hit with a 40% levy on any amount over the SFT then income tax of 40% on what remains.
You mean Chargeable Excess Tax on the amount over the SFT?
That depends on how much you draw down and your tax credits and standard rate cutoff point.
You can reduce it slightly by offsetting the 20% tax on the pension lump sum against the 40% CET.
I have always been invested more or less 100% in equities, most of my investments were outside pension as I had started it years ago when I was young so pension was not a priority for me.
Now I have a reasonable sized prsa but not large and am probably 10 years from retirement so am thinking of substantially increasing my allocation to pension in order to fully take advantage of the tax benefits.
However after the incredible stock market run up in last 5 years I am now reluctant to go 100% equities but am also worried about "defensive funds " with high exposure to bonds given what has happened to bonds in recent years with rise in inflation and interest rates.
Am thinking of putting a third into European equity fund, a third into developed world equity fund and a third into a European bond fund or defensive fund.
What do others think, I definitely want to reduce as much as possible exposure to US markets that's why have tilted to European?
Now I have a reasonable sized prsa but not large and am probably 10 years from retirement so am thinking of substantially increasing my allocation to pension in order to fully take advantage of the tax benefits.
However after the incredible stock market run up in last 5 years I am now reluctant to go 100% equities but am also worried about "defensive funds " with high exposure to bonds given what has happened to bonds in recent years with rise in inflation and interest rates.
Am thinking of putting a third into European equity fund, a third into developed world equity fund and a third into a European bond fund or defensive fund.
What do others think, I definitely want to reduce as much as possible exposure to US markets that's why have tilted to European?