Multiple pensions and MPAA

jonesey_boy

Hi am looking for advice please,
Im 2 years away form being able to draw on my pensions. I have 2 currently, one through work a defined contribution pension and a small one i had many years ago and stopped paying into. The small pension matures at 55 and is only worth approx £29,000. my question is I know I can take the tax free 25% from this pot at 55 but are there any ways I can draw on the full amount without triggering MPAA (money purchase annual allowance). I really dont want to affect my work pension as I wont be drawing this until im 67 and I believe the allowance reduces from £40,000 to £4,000. Im not sure of the in's and out's here but if there was a way even to draw on more than 25% that would be an improvment. 
Thanks

MallyGirl

I will be ignoring the whole "robbing your future self" argument and sticking to the question here.
Is the small one also a DC pension or are you quoting the transfer value of a DB pension?
If DC with no special features/benefits then you could transfer to HL, get them to split into 3 pots of under £10k and take them out under the small pots rule. You will pay tax but won't invoke the MPAA.

Albermarle

The small pension matures at 55 and is only worth approx £29,000.

Defined contribution pensions do not mature normally. You can take them from age 55 ( rising to 57) or later , or not at all ( and leave them to a heir) . Is there something unusual about this pension, or as mentioned above is it actually a defined benefit pension?

Marcon

jonesey_boy said:

Hi am looking for advice please,
Im 2 years away form being able to draw on my pensions. I have 2 currently, one through work a defined contribution pension and a small one i had many years ago and stopped paying into. The small pension matures at 55 and is only worth approx £29,000. my question is I know I can take the tax free 25% from this pot at 55 but are there any ways I can draw on the full amount without triggering MPAA (money purchase annual allowance). I really dont want to affect my work pension as I wont be drawing this until im 67 and I believe the allowance reduces from £40,000 to £4,000. Im not sure of the in's and out's here but if there was a way even to draw on more than 25% that would be an improvment. 
Thanks

Yes.Transfer the £29,000 pension out to 3 separate personal pensions and you can take each one (all at the same time or at different times) under the 'small pots' regime, which applies to a pension worth no more than £10,000 at the time you withdraw the whole lot in one go. You must specify that's the basis on which you are withdrawing it and you can take up to 3 small pots in total from private pensions, which neatly deals with the whole £29,000. 25% of each pot is tax free, the rest taxable at your marginal rate. 

Taking one or all of them under the small pots regime does not trigger the MPAA (and uses 0% of your LifeTime Allowance, although that's not a concern for you).

Suggest you put nearly £10K into one pot and take that first, to minimise the chances of the other 2 breaching the £10K limit. If you've still got a couple of years to go, you might think about transferring to 4 separate personal pensions to avoid the chance of any of them hitting the £10K mark before you can access them. You can only take 3 under the small pots regime, but that would still enable you to get your hands on a large chunk without triggering the MPAA.

Doesn't matter whether the £29,000 relates to a DB or a DC scheme. You won't need to take financial advice, even if it has special features such as a guaranteed annuity rate (DC) or a guaranteed final pension (DB) - but do check before you transfer, unless your only priority is being able to access the funds.

Albermarle

Yes.Transfer the £29,000 pension out to 3 separate personal pensions

Only possible if the current pension allows partial transfers. Otherwise you would have to transfer it all first to one that does.

 You must specify that's the basis on which you are withdrawing it and you can take up to 3 small pots in total from private pensions,
Not all pensions providers facilitate Small Pots withdrawals, so this needs checking in advance.

gm0

And if you can't be bothered with the extra transfers and paperwork to get the small pots solution to work across multiple providers then the answer with the single scheme is no there is not another route to more than 25%

25% of the full value as TFC. All crystallised but no further income taken. 
MPAA not triggered for the other scheme on TFC only

It is essential to make sure no income gets setup from the crystallised 75% (not usually difficult as this is typically a separate step anyway).