Small pension pot question

The_Grouch

Hello everyone.

Looking for some advice on behalf of a family member. They are mid 50s and have a small personal pension pot (around 10K). They are looking to stop paying into this and take out a company pension instead. Just wondering what they should do with the existing personal pension? Can they take it all now as a cash sum? Didn;t know if this was allowed if they start a new pension from scratch? Any advice appreciated.

Thanks!

dunstonh

Just wondering what they should do with the existing personal pension?

The options are:
carry on paying it
make it paid up
transfer it to the company pension
transfer it to another personal pension

Which is best is not possible to tell without an analysis of the options available.

Can they take it all now as a cash sum?

No.

The_Grouch

Thank you dunstonh for your reply. Could they take the pension under 'Triviality' rules when they hit 60? Or is this not allowed if they have another pension ongoing?

I would expect if they are not able to somehow cash it out now/soon, then they will transfer it into the company pension.

jem16

The_Grouch wrote: »

Could they take the pension under 'Triviality' rules when they hit 60? Or is this not allowed if they have another pension ongoing?

They can only cash it in under the triviality rules if the total of all their pensions is under the limit.

Loughton_Monkey

dunstonh wrote: »

The options are:
carry on paying it
make it paid up
transfer it to the company pension
transfer it to another personal pension

Which is best is not possible to tell without an analysis of the options available.

There could be another option if he is 55 or more. That is to draw the pension now. He could draw 25% as a tax free lump sum, and the remaining £7,500 would have to be paid as an annuity.

Implications of this, though, are that (a) the actual pension will be quite low. You should 'shop around' for best annuity rates, but not many companies will be excited by such a small amount, and (b) almost certainly (because he still works) the whole annuity amount will be taxable at his highest rate. This turns out to be not a problem if he will be paying tax anyway when drawing all of his pensions.