Finance expert reveals £1 hack that could save pensioners from paying too much tax

Finance expert reveals £1 hack that could save pensioners from paying too much taxBBC

Transcript

00:00What's this about a pound to protect your pension?

00:03This is the pensions hack that we've been talking about.

00:05Look at her little face!

00:06I know, I'm very happy about it.

00:07This is so clever.

00:09Listen, we'll take it all day long.

00:11So if you think about Arthur, Arthur's situation, he wants to withdraw a chunk.

00:15So what we're going to want Arthur to do is withdraw a small amount first and let's pick a pound.

00:21So if he makes that as the first withdrawal rather than the £10,000, that will trigger the system

00:26and he will be able to see what the tax code is that the pension provider gives him

00:31and see whether it's correct.

00:33And if it's not correct, you've got that time to tweak it and get it correct using the forms and stuff.

00:40But once it's correct, you can then go ahead and take the bigger amount, that larger sum of £10,000

00:44and know that it's going to be taxed properly.

00:47So just simply by doing the £1, or sometimes it needs to be a little bit larger than £1,

00:54your pension provider might say, can it be £100?

00:57So just speak to your pension provider.

00:59But just doing that smaller one helps to kind of trigger it without them withholding loads of tax.

01:05I think ultimately, look, the system does need to be reformed further.

01:08With pension freedoms, we do want access to our money at different times for different reasons

01:12and we shouldn't have to have the £1 hack.

01:15But in the meantime, it's something worth doing.

01:17And I don't know about you, but pensions is overwhelming for lots of people.

01:20If this is something that still makes you a little bit nervous,

01:23if you can call pension-wise, a service that government provides,

01:29you can walk through what you would like to do and they will hold your hand through it.

01:32But ultimately, if you're taking a chunk out of your pension, we want it all to go to you.

01:36We don't want to wrongly go to the tax man and you have to claim it back later from HMRC.

01:40Yeah, but I love that because, like you say, you've worked all of your life to get to that point.

01:44Arthur wants to enjoy his money.

01:45He doesn't want to be given all to the tax man, I say.

01:47Hey!