Taking my pension as I can't carry on working but worried about the taxman

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Before I start I have read the disclaimer and am not looking for financial advice. I just need an answer to a simple question about income tax, please.

I'm 66 in October. I had myxoid sarcoma on my leg, this has been removed but has metastesised (sp!) to my Lymph glands. Although I feel well at the moment I have been told it's incurable and no treatment is available. So I might have months, years, short time long time who knows. Before I was diagnosed I planned to carry on working until 68 but I'm now going to finish on my 66th birthday when I also get my state pension. I'm not  unfit to work but I just can't motivate myself to deal with it all any more. I do have a workplace pension and I intend to take the maximum possible lump sum payment now, bluntly, because I don't know how long I've got and I want my partner to have the money now. I am not looking for financial advice, advice on pension products, yes I have read all the disclaimers but I know what I want to do. Finish work, take the money, as much as I can right now! What I do not know is what will the taxman take from my lump sum, which is referred to as a 'tax free lump sum' but is it really?  My situation is complicated slightly by the fact that I previously took ill health retirement at 55 (nervous breakdown due to bullying, believe me a walk in the park compared to cancer) and took another pension then (and another lump sum). I went back to work after a few months in a lower level job and for the last 11 years have never been happier, but then cancer came along and it's time to call it a day. 

Can anyone help? Is my so-called 'tax free lump sum' really tax free? And if no one here is allowed to answer that, do Macmillan have trusted financial advisors who I could talk to? Honestly I feel so stressed by this I feel that there is a whole nest of vipers who call themselves 'financial advisors' out there just waiting to rob me, charge extortionate fees, whatever. I don't know where to turn or who to trust. Thank you for reading.


  • Hello 

    Thanks for getting in touch and I am sorry to hear about the situation. Before I run through some information with you, I’d just like to say this may be easier to discuss over a phone call due to the complexity involved. There may also be additional tax efficient options on the pension if life expectancy is statistically less than 12 months. If you feel up to it, we have a financial guidance team that can go over all this. They can be reached on 0808 808 0000 and are open between 8am and 6pm Monday to Friday. If you call, just select option 1, then 2 and then 1 again.

    Generally speaking, most pensions are able to offer a tax-free lump sum (this is completely free of income tax and will not usually affect your personal allowance either). The tax-free lump sum available also wouldn’t usually be affected by you accessing a separate pension previously.

    There can be a number of ways of accessing a pension pot and we would be more than happy to go over them with you including the tax implications on each option. However, if you would prefer you can also get financial advice. You can ask family and friends for a recommendation or by visiting: www.findanadviser.org/find-an-adviser.aspx

    Tell the adviser what’s needed e.g., advice on retirement options due to a cancer diagnosis. The Financial Adviser should arrange a meeting to discuss these needs and do a fact-finding exercise (this is where they ask questions about finances and personal situation). Their next step is to research options and put together their recommendation.
    MoneyHelper also have some useful websites and tips for choosing a Financial Advisor. Please access the link below for more information:
    When choosing a financial adviser; always check that they, and the company they work for, are authorised by the Financial Conduct Authority (FCA).
    It’s possible to check individuals and companies on the FCA register:
    To speak to the FCA directly, phone 0800 111 6768 from 8am to 6pm, Monday to Friday (except public holidays), and 9am to 1pm Saturdays.

    I hope this provides you with a bit of helpful information. If you have any further questions or would like to discuss things such as mortgages or insurances, then please don’t hesitate to get back in touch. 

    Yours Sincerely, 


    Chris H 
    Financial Guide 


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