Buying pension in small pots to avoid MPAA and LTA issues

Albermarle

j.p said:

And further confirmation:
https://help.fidelity.co.uk/site/dealing-and-managing-cash/Pension-under-small-pots-rules

To be clear though as far as I know only HL will actually split off three small pots from your existing pension .
Apart from Fidelity, and HL , Aj Bell and II will definitely pay out a pension uner £10K under small pot rules, but some others will not and will just make a normal UFPLS payment , which is a BCE .

TcpnT

TcpnT said:

garmeg said:

dothenumbersaddup said:

Hello, I am 56, and would like to make a pension contribution of circa 25K this year. The question I have is - does it make more sense to buy two or three small pot pensions, rather than one larger one so I do not fall foul of LTA or MPAA rules?  I’ve not found many pension providers who specifically market small pots?  Is this because they do not make as much money out of them?

Hargreaves Lansdown will create a separate 'small pot' arrangement from a larger pension pot if you want to take £10,000 as a small pot. Think they are the only provider that is this accommodating!

Garmeg, thanks for this info about HL. Once again this forum has saved me a fortune.
I contacted HL to ask about the possibility of taking three lots of £10000 small pension commutation from the uncrystallised portion of my SIPP which will be over LTA. Turns out to be extremely simple as they don't even need to split off 3 small accounts before doing this - all taken care of inside their systems somehow and reported to HMRC in a way that satisfies their requirements for them to qualify as small pots.

The only requirement is to complete and sign a short application form (3 in total, one for each withdrawal) and supply a covering letter explaining which account these are to be taken from and how much to take. This covers the situation, as in my case, that the balance of the account is greater than £30000. For some reason the application forms do not ask for an amount to be specified - I assume because the intention of the rule is that it should apply to small pots of less than £10000 and the whole value would normally be cashed in.

They have acknowledged receipt of the forms and I have sold investments to make sure that there is at least £30000 in the account and the withdrawals should be completed within a couple of weeks.

So a £7500 tax free gain plus the balance withdrawn at BR tax with no LTA implications. Seems too good to be true.

Just to confirm that this all worked out as promised. I received three payments of £8500 into my bank account on consecutive days. All complete by 21st of Jan. So very efficiently done.