Aviva drawdown and tax deductions (Edit) - new additional quick question

Sea_Shell

Croeso69 said:

Sea_Shell said:

Another "sub" question...

How is the taking of small pots monitored, if you are applying to take them across 3 different providers?   

Other than the benefits mentioned above re the LTA and MPAA (not applicable to us), would there be any fallout, if Aviva did treat these two plan number as two separate small pots, if he then pulls 2 other small pots from elsewhere?

I'm assuming HMRC get notified, eventually, that, in fact, 4 small pots have been accessed, but in our case, would that make any actual difference to anything?

I'm assuming you can apply for small pots simultaneously from different providers, or do they check on a central database or something before releasing the funds under SP rules?

I guess it is monitored by HMRC. I will be taking three, exactly £10k each thanks to Hargreaves Lansdown creating sub pots specifically for this.

I have already crystallised 100% LTA to the penny.

Not risking breaking the law and taking a fourth small pot. Just won't crystallise the LTA excess until age 75, unless I need to! Doubt I will get lucky and have LTA abolished.

Is it actually "breaking the law" though, to take more than 3?   

Croeso69

Sea_Shell said:

Croeso69 said:

Sea_Shell said:

Another "sub" question...

How is the taking of small pots monitored, if you are applying to take them across 3 different providers?   

Other than the benefits mentioned above re the LTA and MPAA (not applicable to us), would there be any fallout, if Aviva did treat these two plan number as two separate small pots, if he then pulls 2 other small pots from elsewhere?

I'm assuming HMRC get notified, eventually, that, in fact, 4 small pots have been accessed, but in our case, would that make any actual difference to anything?

I'm assuming you can apply for small pots simultaneously from different providers, or do they check on a central database or something before releasing the funds under SP rules?

I guess it is monitored by HMRC. I will be taking three, exactly £10k each thanks to Hargreaves Lansdown creating sub pots specifically for this.

I have already crystallised 100% LTA to the penny.

Not risking breaking the law and taking a fourth small pot. Just won't crystallise the LTA excess until age 75, unless I need to! Doubt I will get lucky and have LTA abolished.

Is it actually "breaking the law" though, to take more than 3?   

The law says you can have a maximum of 3. So, maybe?

You can have an unlimited number of small pots from occupational plans though. Pity I cannot "fix" this to take another 20 x £10,000 out to cover my uncrystallised LT excess. Lol.

Sea_Shell

Croeso69 said:

Sea_Shell said:

Croeso69 said:

Sea_Shell said:

Another "sub" question...

How is the taking of small pots monitored, if you are applying to take them across 3 different providers?   

Other than the benefits mentioned above re the LTA and MPAA (not applicable to us), would there be any fallout, if Aviva did treat these two plan number as two separate small pots, if he then pulls 2 other small pots from elsewhere?

I'm assuming HMRC get notified, eventually, that, in fact, 4 small pots have been accessed, but in our case, would that make any actual difference to anything?

I'm assuming you can apply for small pots simultaneously from different providers, or do they check on a central database or something before releasing the funds under SP rules?

I guess it is monitored by HMRC. I will be taking three, exactly £10k each thanks to Hargreaves Lansdown creating sub pots specifically for this.

I have already crystallised 100% LTA to the penny.

Not risking breaking the law and taking a fourth small pot. Just won't crystallise the LTA excess until age 75, unless I need to! Doubt I will get lucky and have LTA abolished.

Is it actually "breaking the law" though, to take more than 3?   

The law says you can have a maximum of 3. So, maybe?

You can have an unlimited number of small pots from occupational plans though. Pity I cannot "fix" this to take another 20 x £10,000 out to cover my uncrystallised LT excess. Lol.

Can you not withdraw a pension, of any size, in full in one go, subject to payment of tax due?

Could we ask for the Aviva pension NOT to be treated as a "small pot" but as any other pot, regardless of size, as like I said, the LTA and MPAA issues don't bother (or apply) to us.

Does it actually matter if the pot is £5000, £10,000 or £16,750, if we decide to take it as a lump sum?

dunstonh

Does it actually matter if the pot is £5000, £10,000 or £16,750, if we decide to take it as a lump sum?

£5k and £10k under small pots rule would not trigger the MPAA.   £16750 cannot be taken as a small pot and would use UFPLS and would trigger the MPAA.

If MPAA doesnt matter to you then it makes no difference as small pots and UFPLS use the exact same method.   

Sea_Shell

dunstonh said:

Does it actually matter if the pot is £5000, £10,000 or £16,750, if we decide to take it as a lump sum?

£5k and £10k under small pots rule would not trigger the MPAA.   £16750 cannot be taken as a small pot and would use UFPLS and would trigger the MPAA.

If MPAA doesnt matter to you then it makes no difference as small pots and UFPLS use the exact same method.   

Thanks for that.

So if you took a pot of say £9000, who decides if it's taken as small pot or UFPLS?   Does the amount dictate it, or do you have to tell your provider what basis your taking it under?

dunstonh

So if you took a pot of say £9000, who decides if it's taken as small pot or UFPLS?

Different form and different notification by the provider to HMRC.

Does the amount dictate it, or do you have to tell your provider what basis your taking it under?

You have to tell the provider which method.    It is not automatic based on the amount.

Sea_Shell

dunstonh said:

So if you took a pot of say £9000, who decides if it's taken as small pot or UFPLS?

Different form and different notification by the provider to HMRC.

Does the amount dictate it, or do you have to tell your provider what basis your taking it under?

You have to tell the provider which method.    It is not automatic based on the amount.

Thank you, I think that's cleared it up in our minds.

Croeso69

dunstonh said:

Does it actually matter if the pot is £5000, £10,000 or £16,750, if we decide to take it as a lump sum?

£5k and £10k under small pots rule would not trigger the MPAA.   £16750 cannot be taken as a small pot and would use UFPLS and would trigger the MPAA.

If MPAA doesnt matter to you then it makes no difference as small pots and UFPLS use the exact same method.   

The taxable portion of UFPLS is taxed at emergency tax rates unless the provider has a tax code for you, whereby they would use that instead.

The taxable portion of a small pot is taxed at basic rate. Regardless.

However at the end of the tax year HMRC would ensure that the same (correct) tax was collected overall.

ncfc1902

Sea_Shell said:

Thanks for that.  Yes, they were an old Friends Life / AXA plan.   That makes sense about the different segments.

So the question we need to ask is whether it is a single pension pot as far as the small pot rules go, or if each segment can be treated separately.

They normally need to be taken together, however if the 3 plans contain a mixture of Protected and Non Protected rights, then the NPR can be taken as a SLS providing they total no more than 10k

Sea_Shell

Croeso69 said:

dunstonh said:

Does it actually matter if the pot is £5000, £10,000 or £16,750, if we decide to take it as a lump sum?

£5k and £10k under small pots rule would not trigger the MPAA.   £16750 cannot be taken as a small pot and would use UFPLS and would trigger the MPAA.

If MPAA doesnt matter to you then it makes no difference as small pots and UFPLS use the exact same method.   

The taxable portion of UFPLS is taxed at emergency tax rates unless the provider has a tax code for you, whereby they would use that instead.

The taxable portion of a small pot is taxed at basic rate. Regardless.

However at the end of the tax year HMRC would ensure that the same (correct) tax was collected overall.

I'm not sure that would actually make any difference to DH at the end of the day as aren't the basic tax code and emergency tax code based on the same amount - 1257.   If they are both paid net of tax, then he'd have to reclaim the tax which ever way, wouldn't he?

His total income for 21/22 is likely to be £16,000 from pension pots ("small" or otherwise), of which 25% would be tax free, leaving £12,000 taxable at 20%, so £2400 would be deducted as source.

He will also have approx. £1350 in annual interest in the new tax year too (mainly from a maturing fixed term account)

So once it all shakes down, he just needs to apply to re-claim the paid tax.