Can I take small Pension pot early?

eddieps

Afternoon all

Hope someone can help, I have small personal pension with Standard Life taken out while working for company 15 years ago only paid in for 4 months then left, the pension has been kept rolling along by itself and now has £4,400 in it.

I also have another personal pension taken out in 1988 which is still being paid into (would have transferred over the Standard one but they would not allow?)
Anyway can I cash in the Standard one and leave the Abbey one for retirement day....only 14 months to go as 65 in March 2018.

Thanks in advance
Eddieps

kidmugsy

I don't see why not. In your shoes I might consider cashing in after 5/4/18 if that would reduce my tax bill.

If you do empty the Standard pension that will restrict how much you can add to pensions in future to £4k p.a. That might be irksome if you saw some advantage in making a sizeable pension contribution in your last two tax years of employment, for example as a way of reducing tax due.

jamesd

Tell Standard Life that you want to take out the money using the small pot rule. This will not cause your annual allowance to be cut from £40k to £4k. You're allowed to use the small pot rule up to three times in your lifetime for up to £10k per pot and the pension must be completely emptied by it.

It'd be a really bad idea to get your annual allowance cut at the time when you should normally be trying to pay your whole earnings into pensions to get the greatest possible tax relief gain before you retire. Using savings or 0% for purchase credit cards can help with this.

I've assumed that you're 55 or older and not over the lifetime allowance of a million Pounds.

eddieps

Thanks Jamesd
And yes afraid 55 passed years ago lol.
Am just approaching 64th birthday so only got year to go anyway and unlikely to be making any future payments into pot, so thinking might as well take the Standard fund which has been sitting there for last 15 years and carry on with payments into Abbey one, have just started sole trader business and going to take year to earn anything so unfortunately there is not going to be much spare to boost the pot

jamesd

Why not make more payments into a pension? Do you like paying more tax than you have to? You can save the income tax on a quarter of your income. Pay into a pension, take out 25% of the gross as a tax free lump sum. Assuming you have enough savings to cover it for a while. The 75% can be taken as taxable income, if you take a penny of this you'll be capped at 4k gross pension contributions a year for life.