UK Tax Questions? Ask a UK Tax Advisor for answers ASAP
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.
If you release your pension from any scheme before the age of 55 you can indeed be taxed at up to 60% on the sum liberated unless you are in very poor health. Over 55 pension release is possible. Of the sum liberated 25% is tax free, the balance taxed at your marginal rate of tax. Also, the firm which holds your pension pot will charge for early release and you could easily loose up to 40% thereof.
The Money Advice Service has a very useful guide on this matter. You can read about it here:
In general terms pension release is an expensive exercise. It is far better to wait until your pot can be converted into an annuity, although current annuity rates are far from attractive.
I do hope that I have given you some food for thought.
Further investigation reveals more problems with unregistered pension schemes of which you should be aware. It comes from NIBusiness.co.uk [edited]:
' [These schemes] are not liable for tax or National Insurance contributions as they are made
Non-registered schemes may also be liable to income tax and capital gains tax at the rate applicable to trusts.
The benefits paid by such schemes are:
So the ability to have 25% of a lump sum tax free is not available, sorry.