I have been tearing my hair out on my UK Pension Distribution....
I am 56 years old, laid off from work when I was 52 or so.
(I have not gone back to work yet, so I guess I am retired...)
As far as my transaction... I have started UK Tax-free drawdowns from my UK Pension via a
pension commencement lump sum (PCLS)? (PCLS, which is often known as ‘tax free cash’ or a ‘tax free lump sum’, is a tax free payment which most people can receive when they start accessing their pension benefits. It is normally 25% of the value of the pension benefits being accessed.)
If I do what you say, and use 7 in box 7, then I barely have any tax...
But I see an option 1, and if that is chosen due to me being under 59 1/2, it is bad.
As option 1, I get whacked with a 10% early withdrawal penalty... As this is a UK pension, there is no 1099-R so I need to choose correctly. I earned the money to fill this pension in the UK and it must have been pre-tax-investment via my employer.
If while taking advantage of the UK Tax Free benefit, the US hits me with early withdrawal penalties, I may as well pull money from my US 401k and wait till I am 59 1/2 to use the UK pension.
If I can't avoid this early withdrawal penalty, it is better to avoid the UK pension altogether.
I could just choose 7, but I want to clear my conscience and do it right.
Thanks
