Take my pension to clear my credit card debts.

Dox

Twentytwothousand said:

Sorry to jump on this but can you use the small pot rule to take £10k from a £17k pot? or do you need to empty the pot?  I am in a similar position, I have one pot that is at a low level, not growing at all (totally stagnant for 2 and a half years) and I could really do with the money to pay off another debt due to a Covid related pay cut. If I take £10k from it (it's a Bank of Scotland/ex Scottish Widows pension) how do I avoid triggering anything sinisiter and can I leave the other £7k there? I have three other pension pots, all doing fine. Not retired as yet and not going to be able to for at least 10 years (I'm 55)

You have to take the whole of the pot. The work round  as I've mentioned above (different scheme/numbers, obviously):

You may be able to transfer out of the SW as a split transfer, putting £9K into two different pension schemes. You could then cash these in on the basis they are 'small pots', which applies where the value is under £10K per pot. Same rules - 25% tax free for each pot, balance taxable at your marginal rate. That wouldn't trigger the £4,000 a year restriction. Again, make sure the SW pension has no hidden attractions. 

Tealblue

jamesd said:

Regrettably you've received some incorrect answers so I'll first correct what those have said. If you "flexibly" take taxable money from the SW plan you will trigger the Money Purchase Annual Allowance. That limits contributions to personal pension in your name to £4k a year and is usually a bad idea for those still working. But "flexible" only covers two things: UFPLS lump sums or taking taxable money from a Flexi-access Drawdown account. You do not trigger the MPAA if  you do either of these things (and some not relevant others):

Rather a patronising comment, given that OP was talking about taking the whole pot, which would trigger the MPAA - and that's the basis on which these so-called  'incorrect' answers have been given. 

ffacoffipawb

Tealblue said:

jamesd said:

Regrettably you've received some incorrect answers so I'll first correct what those have said. If you "flexibly" take taxable money from the SW plan you will trigger the Money Purchase Annual Allowance. That limits contributions to personal pension in your name to £4k a year and is usually a bad idea for those still working. But "flexible" only covers two things: UFPLS lump sums or taking taxable money from a Flexi-access Drawdown account. You do not trigger the MPAA if  you do either of these things (and some not relevant others):

Rather a patronising comment, given that OP was talking about taking the whole pot, which would trigger the MPAA - and that's the basis on which these so-called  'incorrect' answers have been given. 

Not patronising at all.

Malthusian

Tealblue said:

jamesd said:

Regrettably you've received some incorrect answers so I'll first correct what those have said. If you "flexibly" take taxable money from the SW plan you will trigger the Money Purchase Annual Allowance. That limits contributions to personal pension in your name to £4k a year and is usually a bad idea for those still working. But "flexible" only covers two things: UFPLS lump sums or taking taxable money from a Flexi-access Drawdown account. You do not trigger the MPAA if  you do either of these things (and some not relevant others):

Rather a patronising comment, given that OP was talking about taking the whole pot, which would trigger the MPAA - and that's the basis on which these so-called  'incorrect' answers have been given. 

They are still incorrect, as the OP could take the whole pot under the small pots rule without triggering the MPAA. (Assuming he has not already taken 2 or more small pots, which seems a safe bet.) So to say that taking the whole pot would trigger the MPAA is incorrect. Only taking it "flexibly" would.

Naturally he would have to split it up first.

jamesd

ffacoffipawb said:

jamesd said:

The pension firm will start out with no tax code so will charge you on the emergency month 1 basis, so you'll have excess tax deducted initially.

Minor correction: Pensions taken under the small pots rule use the BR tax code, not an emergency code. I took one last year and have a schedule that confirms it.

Thanks, corrected. For others, both Prudential and LITRG confirm that BR will be used. An exception being if another tax code for you is already known.

Twentytwothousand

Thanks so much. I have moved some of a dormant small person pension into a company pension, leaving a small pot to be drawn down without triggering anything.   Only question is why it takes SO long for them to release the funds. But hey ho, this has been a bit of a life saver so many thanks