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What factors are used when calculating the Lump Sum option?


The client is assumed to draw their entire pension fund in a single lump sum. 25% of the amount withdrawn will be tax-free, the remainder is taxed as income. The following assumptions are used when calculating the estimated tax that would be payable.

  • The current income tax bands in force are increased in line with RPI each year.
  • The same current marginal rates of tax are also payable in the future.
  • Allowance is included for the removal of the personal allowance on a 2 for 1 basis on earnings over £100,000
  • The client has ceased working when the fund is taken (i.e. this is the only income taken in that tax year).

The amount shown is the eventual net tax position once any adjustment via their PAYE tax or by a post-tax year-end refund is made.

It should be noted that the payment is likely to be taxed using a month 1 tax code, so the actual tax deducted immediately could be significantly higher than quoted.

If lump sum is selected in Full View, additional options are available to specify whether it will be spent, or reinvested to provide income in the future.

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