25% Tax Free - Multiple Providers - Follow Up Q

cloud_dog

Hi

It's difficult to search and find something specific using the search option so apologies if this question has been asked previously.

I understand the ability to take 25% of your pension tax free but, how does this operate where you have multiple pension pots?

For example one pension (SIPP) has a value which equates to 25% of the overall pension value (across multiple providers); is there a mechanism in place that would allow me to take all the value (25% of the whole) out of one pension account without being taxed?

I appreciate that this may be difficult for individual account providers but was just wondering how it works or if I could make it work?

dunstonh

I understand the ability to take 25% of your pension tax free but, how does this operate where you have multiple pension pots?

25% of each.

or example one pension (SIPP) has a value which equates to 25% of the overall pension value (across multiple providers); is there a mechanism in place that would allow me to take all the value (25% of the whole) out of one pension account without being taxed?

Theoretically yes you can take the lump sum from one. The rules do allow it. However, commercial reality and complexity means it doesn't happen in any area except AVCs linked to a main scheme. Even then, it is not common.

So, for you its likely 25% of each pot. Although you could combine them into a single pot.

cloud_dog

Thanks for confirming.

I have DB scheme and am not going to quite make the full 40 years contribution and was thinking of adding some money in to a personal pension/SIPP and use this 'pot' as the 25% tax free allowing me to keep the other 'pot' for straight consideration of a annuity (or other options in due course).

EDIT: Was also looking to use my (40% tax) contributions and then withdraw and put monies in to the OH (20% tax) pension

xylophone

Does your DB scheme have an associated AVC scheme that would permit you to take your 25% PCLS from the AVC, with no need to commute the main scheme pension?

https://forums.moneysavingexpert.com/discussion/5615124

cloud_dog

For some reason I had 'discounted' the AVC route but I'll find out the details and go from there.

cloud_dog

Ok, found out some information regarding the company AVC scheme.

My primary question was with regard to how the 25% tax free amount would be treated across my existing DB scheme and the AVC account. The answer is that it would be considered as the whole. So, that is good and what I was hoping for.

Just as a comment (and it may have a bearing later), my whole process to obtain the correct contact details and obtain the correct information has been somewhat tiresome. And, for someone who is quite active in the investment world this waiting days on end for progress before going another step and waiting days on end was frustrating.

Some other Qs, if I may...I'm a HRT payer by the way.

My company run a salary sacrifice scheme. So, is it more advantageous for me to make use of this and make AVCs payments via this method rather than an external SIPP and reclaiming HRT element?

I've read there may be NI savings by using this route but am not completely sure whether this primarily benefits the company?

The Group Pension scheme AVCs are with Prudential.

The funds charges vary considerably but (for arguments sake) it is likely to be around 0.75% for the fund I would be looking at initially. I'm only looking to pay around £200 per month in to the AVC, so in the early days the charges won't be horrendous but it is something at the back of my mind. This ties in with my query re any additional savings due to salary sacrifice, i.e. NI; if I were to benefit from a reduction of 1 to 2% of NI contributions then that would mitigate the effect of higher charges (overall).

Prudential provide online access to the AVC account.

Anyone with any experience of the Prudential pension platform? How easy is it to use, change your investment options (funds), etc? Can you do any of this or is it 'just' a statement view of your account?

Bottom line....My No.1 question has been answered which confirms how the 25% tax free amount is considered. That was my primary focus initially.

So, the final question really is, would I be financially better off (not investment wise but overall cost of contributions, charges, etc) using the AVC method as opposed to a SIPP? I have played with Snowman's most excellent provider charges spreadsheet so I know which SIPP I would take if I were to go down that route.

At the moment AVCs seem to me to be the method to use (for my requirements).