LTA small pots loophole

Madeinireland

Hi,

I am about £25k or so over the LTA by my calculation. I have a £115k SIPP with Hargreaves Lansdown. I have heard that it’s possible to use the small pots rule to extract up to 3 small £10k pensions without impact to the LTA. I heard that some providers (at least one anyway) will facilitate this by (I am assuming) splitting off your SIPP into smaller pots to allow you to take them like that or maybe using other means. This I understand is a bit of a loophole as was not intended to be used for this purpose.

Is this possible? And does anyone know if Hargreaves Lansdown will facilitate it? Or is there another provider who will?

Thanks...

MoneyGeoff

No because your total pension provision has to be below £30K to utilise the small pots rule.

Edit: Apparently this only applies when using trivial commutation of the pension rather than the small pots rule

ffacoffipawb

MoneyGeoff wrote: »

No because your total pension provision has to be below £30K to utilise the small pots rule.

No it doesnt.

As long as you havent already crystallised LTA you can do this.

Hargreaves will facilitate this, i have already asked them.

Madeinireland

Do you mean as long as I haven’t already crystallised this specific pot? Or as long as I haven’t crystallised pots to reach the LTA? I haven’t crystallised anything yet but do intend to take my DB pension soon which would use up most of my LTA - but not all.

Thanks...

MoneyGeoff

Really? I always thought it was capped at £30K. What is meant by this:

the value of all your pension benefits (including defined contribution pensions and pensions already in payment, but ignoring any State Pension) when added together do not exceed £30,000 in total.

https://www.pensionsadvisoryservice.org.uk/about-pensions/retirement-choices/the-right-choice-for-me/taking-a-small-pension-as-a-cash-lump-sum

Madeinireland

Geoff - I think it may be referring to the total you can extract using the small pots rule.

Madeinireland

Actually just checked I think the £30k applies when using trivial commutation of the pension less than £30k rather than the small pots rule which I believe is different where you can cash in up to 3 small pots of upto £10k at a time - I think you need to read the link you posted more carefully to understand this.

ffacoffipawb

Madeinireland wrote: »

Do you mean as long as I haven’t already crystallised this specific pot? Or as long as I haven’t crystallised pots to reach the LTA? I haven’t crystallised anything yet but do intend to take my DB pension soon which would use up most of my LTA - but not all.

Thanks...

Crystallise less than LTA (or not at all) then small pots is an option. Crystallise LTA, or more, and the small pots rule is no longer available.

Madeinireland

Thanks for the clarification - good news ��

ffacoffipawb

Madeinireland wrote: »

Thanks for the clarification - good news ��

Intend using this myself, three times.

marlot

I wish I'd known about this a couple of months ago!