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I’m using my pension to help my daughter get on the property ladder.

Helen, 66, has final salary pension income of £11,000 a year and a defined contribution pension pot of £44,000. Her husband has final salary pension income of £20,000 a year. They both receive their full State Pension and have one daughter.


What Helen wants

We want to help our daughter buy her first house, so I’m going to use my pension pot to make a big contribution towards this.

Helen's idea

Taking my whole pot in one go means I will pay tax on it, but most of it will be at 20%. I’m happy to pay 40% on a little, if it means I can give my daughter a healthy deposit for her first home.

What Helen does

  1. Helen takes one quarter of her pension pot as a tax-free cash sum of £11,000

  2. She takes the remaining £33,000 as a taxable lump sum

  3. As her other income puts her in the basic rate tax band, she pays 20% on most of the lump sum, but a small amount will be taxed at 40%, paying £7,153.40 in tax and receiving £25,846.60

  4. In total Helen receives £36,846.60 which she uses to help her daughter buy her house

What Helen gets

Tax-free cash £11,000
Taxable lump sum £33,000 (£7,153 tax leaving £25,846.60)
Total £36,961

See how we worked this out

  • State Pension age64
  • State Pension£8,767
  • Pension pot£44,000
  • Other income£11,000 a year
  • Other savingsNone
  • Property value£175,000

Helen's calculation

Personal allowance (0% tax) Earnings from £0 to £12,500
Basic rate (20% tax) Earnings from £12,501 to £50,000
Higher rate (40% tax) Earnings from £50,001 to £150,000
State Pension £8,767 a year
Final salary pension £11,000 a year

Taxable lump sum

  • Portion of lump sum (taxed at 20%)
  • Portion of lump sum (taxed at 40%)


£30,233 (£6,046.60 tax)
£2,767 (£1,106.80 tax)

Important things to consider

  • As Helen was already in the 20% tax band due to her income, she paid tax at that rate on almost all of her pension pot

  • If Helen had withdrawn the money over two tax years, she would have paid 20% on the whole of the taxable lump sum and not entered into the 40% tax band

  • Once Helen has spent all of the money she received from her pension pot, she'll have to rely on her and her husband’s final salary pensions and their State Pension, unless she has any other assets she can use to give her an income or is able to claim any state benefits

  • If Helen needs extra money she could think about releasing equity from her property, for example with a lifetime mortgage. A lifetime mortgage is a loan secured against her property which could give her a tax-free lump sum. There may be cheaper ways to borrow money. Interest is charged on the loan amount plus any interest already added. The amount owed grows quickly and reduces the equity left in the property.

  • If Helen had left the money in the pension pot untouched, the value of the pot may have risen, allowing her to withdraw a larger amount at a later date. Or her husband or daughter could have inherited it when she died

  • If she’d left it invested, she would also have the risk that the value could fall as well as rise and is not guaranteed

  • This example is based on current law and tax rates. These may change in the future and income tax will depend on individual circumstances

  • If you live in Scotland or Wales you may have a different income tax rate or band

  • The State Pension amount shown here is the current maximum and is only an example. The amount you get depends on your National Insurance contributions’ record and your individual circumstances. You can get a State Pension forecast by visiting View - Check your State Pension

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