Small Pension pot

blomft

Hi all,
I'm 62, semi retired teacher; I have a small pension pot from an old Comet pension. It's worth £3800 at the moment, I have only used £9700 of my 2020 tax allowance (£13807) and I am unlikely to earn any more before April. So my question is: should I cash this in to hopefully take advantage of my unused tax allowance to offset the 20% tax that would be due of 75% (£570) of the pension pot? or should I leave it in to grow? 
I have spoken to Aegon, who now hold it and they advised that they would have to charge the tax at source, but would provide instructions to reclaim from HMRC.
It seems a no brainer to me, but any thoughts or words of caution would be much appreciated.

Dazed_and_C0nfused

Is it definitely a DC pension?

Do you need the money now or would an increased pension be more useful in the future?

NedS

If you are likely to have to pay income tax on it by taking it later, then there is a strong case to take it now, tax free, whilst you can and put it into a stocks and shares ISA where it can continue to grow tax free.

Reasons to leave it where it is would be to shelter against inheritance tax or means tested benefits.

blomft

Neds: thanks for the sound advice, not too concerned about putting it away for the long haul, (not sure how much haul I have left) but S&S ISA makes sense, if I can get access quickly if I need it. That maybe the route I should go 

blomft

dzd & conf: DC pension?  I don't need the money now, but CoVID may have given me the chance to take this one and not pay tax on it, as I said I have £13807 allowance but should only use £9700 ish by April. Hypothetically, if I leave it in and say it grows by £500 in 2 years, then that would be the amount of tax I would pay on it (given that I was earning fully by then). By taking it now, I would get a similar amount now that I could invest again. to put it into perspective, I'd forgotten all about it (plus a couple of others) until 2 yrs ago.

Dazed_and_C0nfused

I think you are getting your tax code allowances and your Personal Allowance mixed up as you cannot have a Personal Allowance greater than £12,500.

Don't forget if you take even just 1p in taxable income from a DC pot it usually means you are then permanently restricted to contributing a maximum of £4,000/year (gross) from then on.  That rule applies even if you don't ultimately have any tax to pay on the taxable element.

Marcon

Dazed_and_C0nfused said:

Don't forget if you take even just 1p in taxable income from a DC pot it usually means you are then permanently restricted to contributing a maximum of £4,000/year (gross) from then on.  That rule applies even if you don't ultimately have any tax to pay on the taxable element.

The £4K maximum annual contribution applies if contributions are made to a defined contribution (money purchase) scheme - hence being called the Money Purchase Annual Allowance.

That limit doesn't apply where contributions are made to a defined benefit scheme - and as OP is a 'semi retired teacher', it's just possible (although unlikely from their question - but might help others reading this thread) they could still be building up benefits in the Teachers Pension Scheme and might want to add an extra slug of cash to that.

blomft

dzd & conf:  yes, Tax free allowance, 12500 + bits. 
the 3 old pots I have aren't ones that I have thought of playing into, even if I can, just waiting for the right time to take them.
I suppose I could transfer them into a new Pension product, but I'm only interested in the Whole lump sum, any annuity on such small amounts is virtually useless. So would you advise taking this 3800 this year in with my unused allowances?