5 Reasons YOU SHOULDN'T take your tax-free cash - UK Pension Planning

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Everyone knows that when you come to retire, you should take all the tax-free cash you can because it just makes sense, right?
In this video, I'm going against the grain and explaining 5 reasons why that may not be a good idea.
TIMECODES
0:00 - Should you take your tax-free cash?
1:00 - Are funds better in a bank account?
2:19 - Let’s talk tax efficiency..
3:15 - What is drip-feed drawdown?
4:00 - What if they change the rules?
4:48 - Growing your tax-free cash
5:55 - Options through a defined benefit scheme
7:54 - The most obvious one
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This channel provides information on general financial planning. It is for educational purposes only and does not constitute financial advice. Unless you take regulated financial advice only YOU are responsible for your own decisions therefore we cannot be responsible for any action or inaction you take. Please take advice specific to you before making any decisions. Principles Personal Finance is an educational channel and is not affiliated with my employer. As such views are stated are individual and should be seen as such.
Investment involves risks. The investment return and principal value of an investment may fluctuate so that an investor's portfolio, when redeemed, may be worth more or less than its original value. Past performance is no guarantee of future results. The information provided in this presentation has been compiled from sources believed to be reliable and current, but accuracy should be placed in the context of the underlying assumptions.
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There are some scams on KZbin where a profile image is copied then used to promote cryptocurrency scams and all that nonsense. I will never, ever, contact you selling any investment product or service. I would never do that, am not allowed by regulation and it goes against the intention of this channel is to educate and inform.

[@johnsue8637]

TAKE AS MUCH HAS YOU CAN YOU ARE ALIVE NOW

[@Desmond.TuTu.]

Also you know the government will be looking at ways to separate you from your cash.

[@marcusnelson3520]

@@Whalewraithperhaps look at what caused them to pass away and modify your lifestyle? For example if it was cardiovascular, you could prioritise reducing cholesterol, monitor your blood pressure and speak to a doctor. Just an idea. I do see your point.

[@Whalewraith]

@@marcusnelson3520 you have a point, being young is the ultimate life hack. Get your pension sorted do healthy stuff, invest etcetera. Unfortunately, whilst I can always improve things at 60 the boat has sailed on a lot of stuff. To anyone younger, Marcus has good advice.

[@marcusnelson3520]

@@Whalewraith I still think that making lifestyle choices now can make a real impact. Strength training, walking, sleep, healthy food. On the financial side, the state pension kicking in soon will help. You’re informed and inquisitive. That’s half the battle. We can only do what we can. All the best.

[@vida2515]

It hasn’t moved to 57 Yet!!!!!

[@jasonburge6081]

Great vid George, many thanks. I have a DB scheme and would like to know how my LTA is calculated when considering taking 25% of my remaining LTA as tax free. I.e. is the LTA calculated using the DB benefit at normal retirement age or the DB benefit at say age 55 ? Naturally the DB benefit reduces if I take before Normal retirement age. Hope this makes sense. Love your clarity in the posts, please keep up the good work.

[@PrinciplesPersonalFinance]

Thanks Jason, appreciate the kind words and your support! I'd suggest having a watch of my Lifetime Allowance video which goes into some of these areas in more detail. So some general rules to be aware of: - The LTA usage when taking a DB scheme is tested when the benefits are DRAWN. That means it will be affected by early or late retirement factors from the scheme, if applicable. - A defined benefit scheme (most commonly where you have 2 options. A full pension or a reduced pension and some tax-free cash.) Bear in mind the tax-free cash on that option is via what is called 'commutation' where they exchange part of the pension for tax-free cash. The tax-free cash in DB schemes often does not provide a straight 25% amount like in defined contribution schemes. - Your tax-free cash is limited to LOWER of your full tax-free cash or 25% of your REMAINING Lifetime Allowance. This means the order of the benefit and when you take them can have an impact on how much tax-free cash you draw. Lifetime Allowance planning is a tricky area and I'd always suggest getting advice specific to you as it's very easy to trip up. 👍

[@hkpr-ro6ui]

The definite benefit of avoiding tax on 25% versus “possible”, “may”, “could”, “potentially”, “if”, etc. You have to have definite reasons not to take it, not a bunch of ifs, buts, maybes.

[@mangalsingh4036]

Great Video just what I wanted to know about. Keep up the good work

[@PrinciplesPersonalFinance]

Thank you! 👍 Appreciate you watching and taking the time to comment.

[@gorticastle8]

Thanks George another informative video

[@PrinciplesPersonalFinance]

Cheers, thanks for watching! 👍

[@BeautifulNaturalDramatic]

Thanks for this information 👍

[@PrinciplesPersonalFinance]

You're welcome, thanks for watching and taking the time to comment! 🙌

[@ronayling1979]

This is all so subjective, so much depends on your own personal financial position at retirement, I took out all my cash allowance to finance early retirement 10 years ago, things looked a lot different back then than they do now! I now view it as a mistake and regret doing it, so think very very carefully and if possible take some advice...

[@PrinciplesPersonalFinance]

I think that's it in a nutshell. There is no 'right' or 'wrong' in this instance. Only what is right for you which is individual. I of course would also say getting specific advice is worthwhile 👍. Thanks for watching

[@johnristheanswer]

Well explained. Thanks

[@PrinciplesPersonalFinance]

You're welcome. Thanks for watching. 🙌

[@rabihah4119]

Great video and a lot to think about for people approaching retirement planning to take the 25% tax free allowance

[@PrinciplesPersonalFinance]

Thank you! Yes, absolutely nothing wrong with that in theory but always worth looking at the alternatives. Appreciate you watching and taking the time to comment 👍

[@HardlyCastsaShadow]

Thanks George, for a DB scheme are the guaranteed yearly increases post retirement only if paid out of an annuity or do they still apply via a drawdown provider?

[@ianh1213]

I understand your view for DB and commutation. I also understand why doing it at 55 would not be a great idea particularly if you still plan to work for another 5-10 years. Wait to get the most you can. However the world and finances have changed dramatically since this video was done. Say I was now 65 and I want to retire is it prudent planning to use that tax free amount to pay off the mortgage or even take advantages of the increased interest rates? How would they compare to the growth I would get from a drawdown hosted pension? I can’t support annuity as it would appear on average I have to live until about 130 just to get was in the pot in the first place never mind interest gained over time the pot is held. Great videos keep em coming please. 🙂

[@PrinciplesPersonalFinance]

Thanks Ian, appreciate your kind words and support! Salient point on the environment changing now cash rates are higher. Although while cash rates are higher (for now) they still remain negative on a real return basis. Things get more complex when considering the trade-off against a mortgage debt, especially when looking at tax-free cash due to the tax position for net income received (including tax burden) vs overpayment vs expected growth. Tricky one and very dependent on individual circumstances!

[@Gazmaz]

Crikey so if you took a drip feed cash withdrawal, and you took say 2% of the 25% does the growth of the uncrystallised mean that the next say 2% you take could be worth the same (or possibly more) as the previous 2% you took in the previous extraction? And does that mean the percentage taken could go on and on and on, or does the percentage count start from the initial value at which you started the take? Hope that makes sense!

[@stephenkelly3431]

Hello, anyone help?. When hmrc consider if you have significantly increased pension contributions, for the purpose of recycling is the assessment against the total of all contributions ( employer +personal) over all pensions(DC and dB) for each of the 5 years (2 before, the tax year possible pcls invested and 2 years after)?

[@Pegaroo_]

When you crystallis your pension you can still leave it invested you don't need to take it as cash and have in a bank account

[@SBK-UK]

Hi really like the info you’re putting out, inceredibly useful & interesting.👍 I have a pension pot of about 250k & would like to take it all out. I am over 55 & NT coded using the 90 day rule to avoid tax each year on my salary. If I release the pension fund am I able to claim the tax back on it? Thanks

[@PrinciplesPersonalFinance]

Hi Steve, thanks for watching my videos and your kind words. Really keeps me going with the long edits etc that are required, so thank you! 🙌 I have to be extremely careful as a regulated individual, as I cannot be seen to give anything which could be seen as specific advice to an individual. I can however talk generally about what would happen for most individuals if they were looking to draw all of a relatively sizeable pension pension pot in one year. Please bear in mind - if an individual was to decide to take out all of their pension pot in a single tax year. They would *typically (not always) have 25% as tax-free cash and the rest would taxable at their marginal rate. If that happened in 1 tax year and the pension value was high, say in the hundreds of thousands. An individual would pay arguably a very large amount to HMRC, in the same way if someone earned £300k a year as a salary they would pay a lot of tax. There is also emergency tax which could apply which I go over in the video - 3 Pension Tax Mistakes to Avoid which provides more detail. Overpaid tax can eventually get claimed back BUT large amounts of tax which have been paid just because someone took a lot out in one year generally are not reclaimable as that is just how the tax system works. The more taxable income you draw or are paid, the more you get taxed on. I have to caveat, nothing I am saying there is giving an indication on what you specifically should do. But pensions are tax deferred income and consequently the tax position on withdrawing the fund should always be given very careful consideration. If in doubt, get advice specific to you.

[@topfuelteddy]

The government will definitely pull the plug on taking this option in the not so near future, I've not doubt about that .

[@PrinciplesPersonalFinance]

I do hope you're wrong..... but I acknowledge the uncertainty as I go over in my last video does not help for making that case! Thanks for watching 👍

[@riverman1432]

Take something if you can before the govt takes everything

[@desiguy995]

there is no inheritance tax on SIPP

[@ianwall9152]

Can you do a video on why you should take the tax free cash especially if you have a mix of DB and DC pensions . Thx

[@PrinciplesPersonalFinance]

Thanks for watching. That's a good idea, i will see if i can come up with something that works. Appreciate you watching

[@riverman1432]

Retiring early then returning to work for less hrs after getting pension is a choice of the individual.Sometimes it it isnt about money but to get away frm a stressful and toxic working environment.

[@TheSilvercue]

If you take it out (say 20k) and put that in a lump into a stocks and shares ISA using your years allowance…that is better than it being in your pension. You could do 40k if you take it around April and use two years allowance (40k).

[@grahambriggs8338]

For a DB scheme this might make sense. DB schemes might only increase with inflation, yet we know over a longer period the stock market will perform better (by around 6% say). So if you take your 40k out and put it into an S+S ISA and leave it, it may grow more than within the DB pension scheme - and you can continue to do this over time. Of course you may be dead by the time you've left it to grow over ten years, say. In addition DB pensions rarely get passed down to children, and spouses might get half, so this turns nothing into something for them, if you die. In a DC pension, it should be invested in the stock market already, and it can be passed on to whoever you like, so taking money out is an IHT risk and otherwise has no point, you want to keep it in the scheme to grow to maximise the 25% tax free aspect over time.

[@TheSilvercue]

@@grahambriggs8338 there is a point. Because your pension drawdowns are taxed at 20% and your ISA drawdowns are not taxed. So there is a tax efficient sweet spot that requires simultaneously withdrawing from a pension and ISA to minimise tax over some time.

[@stevegeek]

Great content. This all makes sense, but I’m 55 this year and planning to semi-retire. I have 500k in my pension, plus some savings and inheritance. My plan is to take the 25% tax free and combined with my cash buy a small 2nd property to let, either as a holiday home or a full time rental. This will supplement my income from part time work. Are there any flaws in this strategy? Another option would be to invest the money in some index funds and live off the dividends - probably a lot less hassle than buying property, but there’s something reassuring about “bricks and mortar”!

[@PrinciplesPersonalFinance]

Thanks for your support on the content Steve, appreciated! 🙌 The rules are rightly very strict around regulated individuals and what can be considered ‘advice’ to which I am liable. So while I can signpost further resources, I can’t direct any action for someone who isn’t a client. I can talk generally though and for second properties, there are various taxation considerations (why not watch my BTL video as I cover quite a few here - kzbin.info/www/bejne/pXqxY3dsp9WEZpY) Holiday lets do also have a host of unique rules around them. It's always important to work with the end in mind I find with retirement. Things to think about are often - How much is the income that is needed? Are you willing to put up with being a landlord? There are many trade-offs here to consider. Wish you well with your planning 👍

[@stevegeek]

@@PrinciplesPersonalFinance Understood and thanks for the feedback George. I’ll keep doing my research before I make any big decision.

[@yinsoen]

I would keep it simple, no buy to let , make sure pension is well protected first. Use inheritance to supplement income and then use pension to draw down slowly per year whilst it’s still investing and growing. Your pension pot is huge 😅

[@stevegeek]

@@yinsoen Thanks for the comments. 500k seems like a lot, but when you run the numbers if inflation stays high and growth is modest it soon disappears, even if I only draw down say 25k / year. A P/T job seems to be the way to go.

[@avantgardefilms2503]

What are your thoughts on the Teacher pension? Should I opt out and invest the money myself? I’m only 25 but I’m worried that I would need money sooner rather than later in life, especially as most of my family die before reaching 70.

[@PrinciplesPersonalFinance]

Thanks for watching. 🙏I can't give any specific comments on what you should be specifically sadly as a regulated individual I'd get in a lot of trouble for doing so. I can say - I did used to advise Doctor's and those with NHS Pensions. It always struck me how lucky they and other public sector workers are for having guaranteed pensions. For my pension setup, I only have the State Pension and what I can build up via a private pension. The legwork required to match the same level of benefits is huge and for most in society through our working lives there are no guarantees on a level of income in retirement (beyond the State Pension.) While the NHS and the Teacher's pension has some differences, they are broadly similar and a good overview here: rtsfinancialplanning.co.uk/10-reasons-why-you-should-not-be-opting-out-of-the-nhs-pension/ I fully acknowledge that for many who are younger, a pension will seem so far away it is near pointless but it can make a HUGE difference to start early and keep going. Your future self will thank you. 🙌 Wish you the best 👍

[@BlazeShorts820]

You'd be crazy to opt out of any state funded pension, they pay out much better than private pensions. My NHS pension after 5 years already pays as much as the private one I've paid into for 20 years and have 20-ish years still to contribute.

[@johnporcella2375]

​@@PrinciplesPersonalFinance The plural of 'doctor' is 'doctors', not "doctor's".

[@PrinciplesPersonalFinance]

@@johnporcella2375 You're absolutely right. Missed it in a quick edit! Something always slips through and I have a habit of focusing on the cuts/sounds etc and missing things like that.

[@seanmcshane1988]

The way taking tax free cash interacts with the lifetime allowance is pretty confusing. Does that mean if one exceeds the LA then you may as well take the whole tax free sum straight away? Doesn't the LA (normally) increase with inflation and so your tax free ceiling would normally also adjust annually with it while drawing down via UFPLS drawdowns? 🤔

[@PrinciplesPersonalFinance]

Hi Sean, thanks for watching. Once you've used all the LA, that's it. So no further benefit from LTA inflation increases if you've used 100%. You'll get taxed on what you have above the LTA at some point 👇 and there could be a case that 'more is more' if it grows. Anything uncrystallised left above your LTA once you've used 100% would be subject to an LTA charge generally at either death, 75 or when taken. 55% as a lump sum or 25% as income depending on which occurs first. The challenge for many is that they are also possible a basic or higher rate tax payer. So the 55% lump sum doesn't differ hugely from (25% + 20% or 40% if taken as income.) There is also the 2nd test on crystallised funds at 75 to watch out for! As-well as estate planning considerations which is a whole different beast..... Not easy to navigate and one of the reasons I'm in a job! 🙃

[@peteraston4753]

Take it all in cash if you can if your a few pence over your allowancies you get no pension credits , cannot claim for anything

[@cmdrthorium1554]

When i look at the chance of reaching the age of 85, the gov stats say 1 in 8 chance? and you would need to be in SE England to benefit. Glasgow, Newcastle, Liverpool, Manchester , as a man were all toast by 75 .. 😞

[@PrinciplesPersonalFinance]

Fair enough and I hear you. My dad's side was from the north east so, similar stats!

[@jameschick3551]

Hi I’ve got some pension I can take out next year, would like to take all of it out it’s a job pension with about 6000 in,, instead of taking 25% out?

[@PrinciplesPersonalFinance]

Hi, thanks for watching. 👍 There are some further details below where you can explore the options further. Pensions valued under £6,000 are typically eligible for the 'small pots' rules. As always, please ensure you understand the tax position before taking any action. www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/taking-your-whole-pension-in-one-go I can't give any specific indication of whether that is the right thing for you to do individually, so I would suggest speaking with the likes of moneyhelper for more guidance. If the question is mainly directed at a pot value of £6,000, it's my view most regulated advice may be prohibitive on cost. Wish you the best. 🙌

[@lesleysmith8300]

Do you know what happens to SERPs. I opted out and when it finished l was asked what l wanted to do but l forgot to reply, so what would have happened to it? Forgot to mention, l have a Government Pension which l now get. I drew down on my 64th year but don't get my state pension till next year.

[@PrinciplesPersonalFinance]

Hi Lesley, thanks for your message and for watching. 👍 SERPS continued to exist and was taken into account when things moved onto the New State Pension (watch my 'State Pension Secrets' video for more detail) Impossible to say for sure about the specific position but I would suggest checking 2 things: 1) Your State Pension Forecast to see if you have any gaps www.gov.uk/check-state-pension 2) If you opted out or perhaps were involved with another private pension. I would suggest looking for it via the Pension Tracing Service www.gov.uk/find-pension-contact-details A decent article with some background here: www.telegraph.co.uk/pensions-retirement/news/contracted-out-deduction-state-pension-reduction-2022-uk-full-payout/

[@savvysocialshow7324]

Don’t forget most pensions providers have 67 as minimum maturity and charge you 5% per year you take it early

[@PrinciplesPersonalFinance]

Thanks for watching. I'll have to push back on that as that isn't the case for many. I'd hazard a guess that perhaps what you are referring to is a member of the Civil Service, NHS 2015 or perhaps LGPS defined benefit pension. As their CARE schemes have a normal retirement age linked to the State Pension age. There are some other defined benefit schemes which have a normal retirement age of 67, but the majority are around 60 or 65. Money purchase schemes don't have early retirement factors. Certainly, a fair point to consider early retirement factors carefully though if you are a member of a defined benefit pension!

[@rickyboy591]

Quick question if you could answer or anyone in the know how . I have 2 private pensions ‘ can I take 25% from both without being taxed or should I pair together.

[@MartinHopkinson]

Since no-one came to your rescue, I’ll give it a go! That said, I’m not an adviser but I’m probably ‘in the know’ because I have multiple pensions too and have already crystallised one of them. You can take 25% tax free cash when you crystallise any uncrystallised funds as long as you have Lifetime Allowance left. (And, even if you are already at 100% LTA, you can also take 25% cash from up to three ‘small pot’ funds, as long as they’re each less than £10000.)

[@rickyboy591]

@@MartinHopkinson much appreciated for you reply 👍

[@danielfrancis3660]

There's a video entitled '6 reasons why you should take your tax free cash.' It's all down to personal circumstances. Chat to your financial advisor me thinks.

[@PrinciplesPersonalFinance]

Agreed! 🙌

[@mramg6038]

Both my pensions are being changed to age 68. I’m 31, & when i started working at 21 that age was 65. Extrapolating forwards, I’ll be working until the age of 74-76, & my life expectancy is about the same. All because the major voters are already pulling their 55 age pensions & dont care.

[@MrAlwaysBlue]

Could I take unlimited tax free withdrawals as long as each withdrawal is below 25% of the FUND value at time of withdrawal? For example, could I withdraw 10% of the fund each year tax free?

[@PrinciplesPersonalFinance]

It wouldn't be unlimited as far as tax-free cash availability. For example if your fund is £100 and you have £25 tax-free cash. If you withdrew £10 just of tax-free cash you have used £10 of the £25 of your tax-free cash. Now you have £15 left of tax-free cash of the remaining on the £90 pot. (As you took out £10 tax-free cash) If that pot grew to £180 without you touching the pension you'd then have £30 of tax-free cash left. (As long as no Lifetime Allowance issues.) Either way, even with growth the amount of tax-free cash would never be unlimited. You could get a lot out if i guess if your withdrawals were very small, but for most that isn't how they want to withdraw. Hope that helps, thanks for watching 👍

[@llamudos9809]

Should you take the remaining cash free cash before 75? If you have a DB pension. You mentioned its a good way of not paying tax on you income.

[@PrinciplesPersonalFinance]

Hi, thanks for watching. As ever here, it really does depend on personal circumstances. The cut-off under current rules for money purchase funds and death benefits around age 75 is worth bearing in mind when deciding if to take tax-free cash. However, depends on the long-term goal and if there are other considerations such as a need for tax-free cash or if the funds are planning to be used for legacy.

[@llamudos9809]

@@PrinciplesPersonalFinance Many thanks. I will be in touch in about 3 years (Before we retire). I have subscribed for a while and like your content, approach and clarity. My partner and i are lucky. We both Work in NHS and have DBs & DCs pensions, SIPP, Just started a t212 Saving ISA, 2 PB accounts (1 full), 2nd property rental Income and future potential of a large amount to diversify + emergency funding. We will likely want a lot of advise when we decide to retire early in 3 years. Will be in touch then :)

[@VincentComet]

Don’t forget they could change the rules and remove the tax free cash

[@jimleitch9576]

Crystallised pension isnr part of your estate if you die ?

[@PrinciplesPersonalFinance]

I'll have to be pedantic here, sorry!! 🫣 As what's in your estate doesn't necessary relate to what is crystallised...for example - a crystallised pension through a defined benefit scheme that provides an income would pay that income into someone's estate and potentially increase it if not drawn. Or, when tax-free cash is drawn from a pension and paid into an individual's estate it would be part of that person's estate unless spent... A money purchase fund with a crystallised pension, say at 75, which is KEPT WITHIN THE PENSION WRAPPER where the Trustees have discretionary powers on the death benefits (usually you will have completed an expression of wish) typically isn't!

[@jimleitch9576]

@@PrinciplesPersonalFinance thanks for reply 👍

[@jtunnicliffe7335]

no one in their right mind would take out tax free cash and put it in the bank - they would invest it in an ISA or outside Isa which will grow as well as in the scheme so it makes no sense to ignore the tax free lump sum

[@PrinciplesPersonalFinance]

I agree with the sentiment but the reality is..... many take their tax-free cash and stick it in a bank account. As advisers it's something we do come across as some consider it 'free money.' As we don't teach finance in the education system these things are obvious to some, but sadly not to all. With funding an investments, unless the tax-free cash is small there can be one of - estate considerations, £20k subscription limits for ISA and CGT reductions coming from next year. So not always straightforward.

[@jtunnicliffe7335]

@@PrinciplesPersonalFinance thanks but even allowing for all that getting a tax free principle amount and investing that must always be better than leaving it in a pension unless you are going to take it bit by bit at 25% tax free - if IHT is a problem then you probably don’t need the pension at all - EIS and Aim can always mitigate that - i will take my tax free cash - at a 38 commutation factor , invest it then later EIS/Aim it or give it away

[@PrinciplesPersonalFinance]

@@jtunnicliffe7335 thanks for your message. I hear what you're saying but I'd have to politely disagree on saying 'always' here. EIS and AIM are very different risk propositions than pension options. For DC funds there's pre-75 death benefits currently and IHT considerations compared to possibly funds in an estate in excess of exempt amounts, or worse for some, exceeding the £2m mark and with tapering of MRNRB. DB vs DCs are different decisions in general. The inflexible nature of DBs means that the early retirement factors (if applicable) have to be considered as part of taking any tax-free cash, even if the commutation rate is as high. As-well as an individual's tax position if they are continuing to work and the DB in payment when vested kicks then into higher rates of tax or even above the £100k mark, causing 60% effective rate of tax. (All general comments, applicable to anyone and certainly not advice to take or refrain from any action) So I will stand my ground 🙃 that it's individual and I don't think we can say one is always better.. Thanks for your message and thoughts. Enjoyed the debate, cheers for watching!! 🙌

[@jtunnicliffe7335]

@@PrinciplesPersonalFinance 👍 thanks - tax is my main problem whatever happens - -high class problem I guess

[@PrinciplesPersonalFinance]

@@jtunnicliffe7335 great problem to have and well done for getting to the position where you have it. A high class problem.... but a problem nevertheless!

[@stephenharris7982]

I think pension credit will soon change i am 60 now so i have 7 yrs left of graft with a little savings

[@tancreddehauteville764]

I think that the main argument against taking the tax free cash before your intended retirement date is that future pension contributions get capped at £4k a year before they are taxed.

[@PrinciplesPersonalFinance]

Thanks for watching. I think there is a misunderstanding. Taking tax-free cash alone does not trigger the money purchase annual allowance.

[@kbeesmot9928]

So, once I have taken 25% tax free cash, I can't tax free cash any more from the crystallised fund? Umm. As I and 57, I could take my 25% cash free chunk. As I am retired, I could withdraw £1,000 a month for ten years tax free as it would be below the threshold to pay income tax.

[@danteburritar2822]

In your scenario the £12k a year you take that is within your personal allowance is not tax-free, but it is taxable at a zero rate. That is the difference and that difference can matter when it comes to other benefits etc.

[@davidcooks2379]

Inflation is 5.5% since 1960

[@jamescollins408]

Saving the tax you would otherwise pay if you took it as pension is a good enough reason! If it becomes part of your estate on death it's not your problem. You'll have worked all your life. Just buy the 1TB iPhone pro max you always hankered after. You will likely have provided for others all your life and I know I had to deny myself many things while providing for a family. Enjoy yourself today, you might not be here tomorrow.

[@PrinciplesPersonalFinance]

A very fair point and sentiment James. Don't disagree with anything you've said here. Life is for living. Thanks for watching

[@jamescollins408]

@@PrinciplesPersonalFinance No problem, spent 42 years with a leading assurer, now part of Phoenix Group. That is actually what I did. Luckily no regrets after 10 years. 🤞for another 10.

[@martinaston1715]

Understand all of this BUT does anyone trust the Govnt to not move the goal posts 25% is very likely to disappear or be watered down..

[@PrinciplesPersonalFinance]

Hope not! Just did a video on this kzbin.info/www/bejne/l5PVpn-MfJxgbLc Thanks for watching

[@hughmcbeath5463]

My fb broker robbed me

[@jonwelderbeast.438]

OK, so you leave all the money in place.........you WILL still get Taxed on anything you take out, except the Gov Allowance before Tax!!!!! TAKE THE TAX FREE Cash and run!!!!!

[@PrinciplesPersonalFinance]

😂 that's a common thought!!

[@MatthewRSimpson]

I am 55 in May, i cant retire until i have been in my job for 25 years (i will be 58). I can then get a lump sum of £134,000 and £18,000 per year. If i dont take the lump sum i will get around £25,000 per year. At £25,000 per year instead of £18,000 per year and £134,000 in my pocket it will take me over 19 years to get that £134,000 back if i dont take the lump sum (£25,000 - £18,000 = £7000. £134,000 / £7000 = 19.14). I will be almost 78 by then. I would rather have the money whist i am young enough to enjoy it. I also thought that my yearly pension was taxable too. An issue i have is that i live in the NE where the life expectancy is the lowest in the country. If i die without taking my lump sum my wife will get a widows pension only of around £10,000 and my lump sum will simply disappear. If i get my lump sum at 58 and die then it will go directly to my wife as well as her widows pension. Ok, i may not die, but none of us know what is around the corner. My wife's sister unexpectedly dropped down dead at 58 in May last year with a pulmonary embolism.

[@grahambriggs8338]

I agree that for a DB pension and family history of dying early the tax free lump sum makes more sense, even if it's only shoved into S+S ISAs over a few years. Paying off a mortgage now rates are between 4 and 6 percent is also reasonable, even if S+S growth on average may still be higher in the long run, at least it takes the mental load of the mortgage off your mind. Other debts are also obvious things to clear, and likely are at higher rates too. What a lot of people do is take the money, buy a new shiny car or two, and it's gone. Others may gift it to children, which is a good idea to do early to minimise IHT risks within 7 years.