Buying pension in small pots to avoid MPAA and LTA issues

garmeg

coyrls said:

garmeg said:

coyrls said:

If you are facing LTA issues, £30K (3 x £10K pots) is going to be neither here nor there, as your £1M+ pot could rise or fall by more than £30K in a single day.

Still useful though. PCLS of £7,500 in my pocket is better than an LTA charge of £7,500 in the Chancellor's.

Or put the money in one SIPP and time crystallisation.

No help if you have more than LTA. Three small pots gives an extra £7,500 as tax free cash (instead of the same amount taken as an LTA charge). Not to be sniffed at.

dothenumbersaddup

Thanks Albermarle and Garmeg, I shall go pension shopping as you suggest!

shinytop

Albermarle said:

dothenumbersaddup said:

Thanks Garmeg and Marcon, really helpful responses.  Seems like investing 8k in three separate pensions would give me the most flexibility, without having to rely on the pension provider to split a larger one - will just need to check the charges though?  

For smaller amounts , a provider that charges a % of the pot will probably be best . Best known Sipp Providers doing this are HL ( 0.45%); Fidelity ( 0.35%) & A J Bell ( 0.25% but with a withdrawal charge ).
In fact I did not realise that small pots did not contribute to the LTA ( I knew about the MPAA not being triggered) and I will now think about opening up a couple of smaller pensions in addition to my main ones as LTA is a future possibility.
Useful this forum !

Neither did I !  So someone already at the LTA could contribute £10k over 3 years and it's outside the LTA? And then do it twice more?    

Albermarle

shinytop said:

Albermarle said:

dothenumbersaddup said:

Thanks Garmeg and Marcon, really helpful responses.  Seems like investing 8k in three separate pensions would give me the most flexibility, without having to rely on the pension provider to split a larger one - will just need to check the charges though?  

For smaller amounts , a provider that charges a % of the pot will probably be best . Best known Sipp Providers doing this are HL ( 0.45%); Fidelity ( 0.35%) & A J Bell ( 0.25% but with a withdrawal charge ).
In fact I did not realise that small pots did not contribute to the LTA ( I knew about the MPAA not being triggered) and I will now think about opening up a couple of smaller pensions in addition to my main ones as LTA is a future possibility.
Useful this forum !

Neither did I !  So someone already at the LTA could contribute £10k over 3 years and it's outside the LTA? And then do it twice more?    

As far as I can see there is no need to contribute the £10K over three years .I had some trouble confirming the LTA - small pots issue but eventually found confirmation on one of the financial advisor websites ( Pru one I think )
In reality you would need to contribute less than £8K net as £2K tax relief would be added and there could be investment growth before you take it.

RSNut

Following threads with similar discussion, and particularly with thanks to 'jamesd'.

I transferred SIPP in excess of LTA to HL. The process of making the three Small Pension Commutation Lump Sum payments from the SIPP was handled extremely efficiently, payment being made a week following each application. As an added bonus the Account Closure fee has been removed as part of their service improvement saving a further £25+VAT !

Albermarle

garmeg said:

coyrls said:

garmeg said:

coyrls said:

If you are facing LTA issues, £30K (3 x £10K pots) is going to be neither here nor there, as your £1M+ pot could rise or fall by more than £30K in a single day.

Still useful though. PCLS of £7,500 in my pocket is better than an LTA charge of £7,500 in the Chancellor's.

Or put the money in one SIPP and time crystallisation.

No help if you have more than LTA. Three small pots gives an extra £7,500 as tax free cash (instead of the same amount taken as an LTA charge). Not to be sniffed at.

So to be clear, for a basic rate taxpayer in retirement , the actual saving is £1500? Also if you actually have less than exactly 3 X £10K small pots it would be less.

garmeg

Albermarle said:

garmeg said:

coyrls said:

garmeg said:

coyrls said:

If you are facing LTA issues, £30K (3 x £10K pots) is going to be neither here nor there, as your £1M+ pot could rise or fall by more than £30K in a single day.

Still useful though. PCLS of £7,500 in my pocket is better than an LTA charge of £7,500 in the Chancellor's.

Or put the money in one SIPP and time crystallisation.

No help if you have more than LTA. Three small pots gives an extra £7,500 as tax free cash (instead of the same amount taken as an LTA charge). Not to be sniffed at.

So to be clear, for a basic rate taxpayer in retirement , the actual saving is £1500? Also if you actually have less than exactly 3 X £10K small pots it would be less.

Saving is 3 x £2,500 = £7,500 as a tax free lump sum (25% of small pot is tax free, though not technically a PCLS) instead of paying the same amount as an LTA charge.

This is applicable regardless of tax rate as 25% of the small pot is tax free.

RetSol

Albermarle said:

dothenumbersaddup said:

Thanks Garmeg and Marcon, really helpful responses.  Seems like investing 8k in three separate pensions would give me the most flexibility, without having to rely on the pension provider to split a larger one - will just need to check the charges though?  

For smaller amounts , a provider that charges a % of the pot will probably be best . Best known Sipp Providers doing this are HL ( 0.45%); Fidelity ( 0.35%) & A J Bell ( 0.25% but with a withdrawal charge ).
In fact I did not realise that small pots did not contribute to the LTA ( I knew about the MPAA not being triggered) and I will now think about opening up a couple of smaller pensions in addition to my main ones as LTA is a future possibility.
Useful this forum !

AJ Bell are scrapping their withdrawal charge w..e.f. 01.01.21.  https://www.youinvest.co.uk/sipp/charges-and-rates. 

Workerbee999

Wow, I have learnt so much on this site, have been following it for ages and just come across this possibility of 3x10k small pots being outside the LTA ( and any occupational ones under 10k?) We have already set up a separate SiPP for OH to ensure we make use of his PA in the 5 years before he starts taking benefits, plus have planned in the £2,880 contributions. Plus lots of great tips on investment choices and managing risks. I expect to get close to the LTA so have now started reading up on planning for it. Really great tips from everyone, thanks.

Brynsam

Workerbee999 said:

Wow, I have learnt so much on this site, have been following it for ages and just come across this possibility of 3x10k small pots being outside the LTA ( and any occupational ones under 10k?) 

Yes, occupational schemes (DB or DC) can count as small pots if their capital value is under the magic £10K mark - and any 'small pot' occupational schemes are in addition to being able to cash in up to 3 small pot personal pensions.

Workerbee999 said:

We have already set up a separate SiPP for OH to ensure we make use of his PA in the 5 years before he starts taking benefits, plus have planned in the £2,880 contributions. 

Not clear from the way your've phrased the above, so just checking: does he have sufficient earned income to support contributions which fully utilise his personal allowance?