In our weekly series, readers can email in with any questions about retirement and pension savings to be answered by our expert, Rachel Vahey, head of public policy at investment platform AJ Bell. There is nothing she does not know about pensions. If you have a question for her, email us at money@theipaper.com.
Question: I am 62 and plan to retire next year. I am going to receive a pension from my employer but I also have a separate self-employed personal pension (SIPP) which I want to take money from as well.
Can you tell me what I need to think about. I understand I can take 25 per cent of my pension and not pay any tax on it. Is that right? Should I take it all at once or can I stagger it? I want to use it to repay some debt and would probably put the remainder in an ISA.
Answer: From the age of 55 (rising to 57 from April 2028) you can take a quarter of your pension pot as a tax-free lump sum and either take the rest as a taxed lump sum, move the remainder to drawdown, or buy an annuity (which gives a set out guaranteed income for life). If you decide on drawdown, you can withdraw a taxable amount any time you want and how much you want.
You must have enough ‘lump sum allowance’ (LSA) left to take a tax-free lump sum – this is usually initially set at £268,275 and will include any tax-free cash sums you take from other pensions, such as your workplace pension.
