Using the small pots rules to avoid Life Time Allowance LTA usage or my annual allowance

AKAGraham

I have been told that I can take up to £10k as a small pot without it affecting my LTA or my annual allowance currently £40k. I have also been told I can do this up to 3 times. That these limits are strict and that I must not exceed them.

Currently I have several defined benefit pensions already in payment and they have used a lot of my LTA. I also have several defined contribution pots all of which exceed £10k. I therefore need to move money (£10k OR JUST BELOW) from these defined contribution pots into other pension arrangements to enable me to make small pots from which I can take small pot lump sums that will extinguish my entitlement to benefits under the arrangement from which the payment is made. In that way my current LTA usage will stay the same and if I want to pay in pension above the Money Purchase Annual Allowance of £4000 (MPAA) I will be able to but I doubt that I will given my LTA situation for my combined pensions.

By this means I intend to take out just short of £30k in 3 small pots that will provide 25% tax free cash and 75% taxed at my marginal rate that will not use up any of my remaining LTA.

So the question is how do I find a scheme that will allow the creation of several small pot arrangements to transfer my existing defined contribution pensions into?

All a bit complicated but I hope someone can help.

QrizB

Others have said that Hargreaves Lansdown are quite flexible whan it comes to small pots?

See eg. this thread:
https://forums.moneysavingexpert.com/discussion/comment/77670924#Comment_77670924

Albermarle

Many pension providers will organise a payment under the small pot rules . However most are not happy to have money transferred in and then back out again and/or they will not split a larger sum down to 3 x £10K sums .
Probably partly as it is a lot of admin and partly because it is really against the spirit of the small pot rule. Clearly it was not meant to be used by people to reduce LTA tax , but it is used like that by a small number ( including me ) 
As above HL seem to be the only one willing to do what you want .

Taking a small pot ( or any withdrawal ) has no effect on your Annual Allowance which relates to pension contributions.

HappyHarry

Albermarle said:

Taking a small pot ( or any withdrawal ) has no effect on your Annual Allowance which relates to pension contributions.

Taking a small pot will not trigger the Money Purchase Annual Allowance (MPAA), even though 75% of the small pot is taxable.

zagfles

Albermarle said:

Taking a small pot ( or any withdrawal ) has no effect on your Annual Allowance which relates to pension contributions.

Bracketed bit is wrong, normally taking income from a SIPP affects the AA, small pots is an exception. Google MPAA triggers.

Albermarle

HappyHarry said:

Albermarle said:

Taking a small pot ( or any withdrawal ) has no effect on your Annual Allowance which relates to pension contributions.

Taking a small pot will not trigger the Money Purchase Annual Allowance (MPAA), even though 75% of the small pot is taxable.

Yes I know that but rereading the OP , it seems I misread their comment about the Annual Allowance of £40K .