small pension cash in

slade1961

hello

i am 55 in this year 2016

i have a small pension £15500 royal london but also 3 others , want cash in the smallest, can someone help me with a route from start to finish of the process this will take , inc, any fees royal will charge me . thank you for your patience.

bigfreddiel

I wouldn't call £15,500 pension small! fj

Silvertabby

I think Slade means a £15.5K total pension pot - not £15.5K per year!

tacpot12

£15.5k is more than you can take as a lump sum. Under the trivial commutation rules, the limit is £10k.

jamesd

slade1961, using normal flexible drawdown rules any amount can be taken from a personal pension as a lump sum, the first 25% tax free, the remaining 75% taxable as normal income whenever it is taken. A few million Pounds would be fine if you had that much. There are three restrictions that may apply:

1. If the pension has special benefits like a guaranteed annuity rate or minimum income guarantee the value of the income using that is calculated and if this value is more than £30,000 professional financial advice is required by law before the transfer can be done. The advice doesn't need to be followed, just taken.

2. If you take any of the taxable 75% your annual limit for pension contributions will be reduced from £40,000 to £10,000 for life and you will not be able to transfer unused limit from the past three years as you normally could. This doesn't apply if all you take is the 25% tax free lump sum. If this matters to you, you should not use the UFPLS withdrawing method because that is always a payment that is 25% tax free and 75% taxed, so it always takes some of the taxable money. Instead you should use flexible drawdown and not take any of the taxable 75%, just the tax free 25%. But there is an exception: the small pots rule. With that you can take out the whole amount and not have the allowance reduced.

3. If the pension is really a defined benefit pension like final salary or average salary, in this case triviality can be used instead.

The small pots rule lets you take up to three pension pots of up to £10,000 each in your lifetime. All of the money in the pot has to be taken, nothing is allowed to remain. So if the pot value is £10,000.01 you can't use the small pots rule with it. You can transfer money between pots to try to maximise the amount you take with one pot's worth of withdrawing, so if you had pots of say 5k and 3k you could combine them with a pension transfer to use one 8k instead of having to use two.

So first thing do do is find out whether any of the pots has any special benefit attached. Then you need to consider whether the value of those benefits is high enough to make it undesirable to take money from it.

Once you have decided which pots to take, then you need to decide whether you want to use the small pots rule or take just the 25% tax free lump sum to avoid the reduction in annual allowance, or if you'll accept the reduction and take some of the taxable 75%.

Pension providers do not have to offer all of the available options. If they don't offer the one you want, just transfer to a place that does offer it.

tacpot, why do you believe that these are defined benefit pensions requiring triviality rather personal pensions that can use UFPLS, flexible drawdown or the small pots rule? Since April 2015 triviality has been abolished for personal pensions and replaced by the small pots rule. For defined benefit pensions the triviality limit is £30,000, increased from £18,000. Maybe you meant small pots with its £10k per pot rule but wrote triviality instead?

xylophone

http://www.scottishwidows.co.uk/extranet/literature/doc/FP0473
may be of interest.

bigfreddiel

Silvertabby wrote: »

I think Slade means a £15.5K total pension pot - not £15.5K per year!

Okay, it wasn't that clear, why didn't he say pot rather than pension I wonder?

tacpot12

Apologies, I misread the information on the pensions services website, so ended up thinking the £10k pot limit was for DB schemes.

jerrysimon

I think the OP meant 15.5k/year as he/she then went on to mention "other"smaller pensions.

Jerry

bigfreddiel

jerrysimon wrote: »

I think the OP meant 15.5k/year as he/she then went on to mention "other"smaller pensions.

Jerry

Like I said earlier, why did he say pension when he meant pot, I have three small pensions, but I do mean pensions.

Cheers fj

AnotherJoe

bigfreddiel wrote: »

Okay, it wasn't that clear, why didn't he say pot rather than pension I wonder?

.......... because people are often very casual with words.

If it was £15k a year that would be around £300k lump sum which in no ones estimate would be small !

But maybe I'm wrong, its been known. Lets wait for OP to clarify.