Age to access pension - simple query

Albermarle

dunstonh said:

Albermarle said:

L9XSS said:

Regarding the small pots rule, could the existing pension be “split” by the provider RL if requested by the OP into one containing less than 10k? Not fully sure of the rules.....

AFAIK, only HL will do this. It is probably quite a lot of admin for little reward for the provider. Also it is against the spirit of the small pots rule so most providers will shy away from it for this reason.

Several others on the intermediary side do it.   RL won't do it without an adviser involved.   So, that would likely be a no go in respect of RL as no adviser appears to be involved.

OK thanks for the clarification. Surprises me that this loophole has not been blocked, although I will use it myself.

jscol

We did actually use an IFA to set up this RL pension. From memory I think RL only deal with advisors and not the public.
At present we put just under £5k per year into this pension and it's at least 8 years away from being claimed so I don't think any aspect of the small pots rule would be helpful for us. I think £30k is the most that can cover?

jscol

Or in theory could we ask our IFA to ask RL to split it into 3 small pots and hopefully one bigger pot nearer the time? I don't understand the small pot rule particularly well. 

dunstonh

jscol said:

Or in theory could we ask our IFA to ask RL to split it into 3 small pots and hopefully one bigger pot nearer the time? I don't understand the small pot rule particularly well. 

Unlikely to be cost-effective (unless the IFA is employed on a servicing basis).   In regulatory terms, that means setting up three pensions which are documented as pension switches (transfers of DC schemes in FCA speak).  That means the IFA would have to go through the full regulatory process. It isn't a simple admin exercise.

xylophone

I think I am right in saying that we can take the 25% TFLS (at 55 or 57) without affecting my wife's NHS pension contributions? In other words she won't trigger the money purchase allowance rules? 

Taking pension commencement lump sum only but no income does not trigger the MPAA.

Taking income would trigger the MPAA in respect of contributions to any DC scheme.

https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/money-purchase-annual-allowance/

What about DB?

Accrual under defined benefits schemes is not tested against the money purchase annual allowance, but will be included in the test of total contributions against the annual allowance/tapered annual allowance:

Case study 1

A client enters flexi-access drawdown and takes income. He then contributes £3,500 to his defined contribution arrangement, while defined benefit accrual is £32,000.  The tapered annual allowance does not apply.

• As the defined contribution contributions do not exceed the money purchase annual allowance no annual allowance tax charge is due, and as total contributions do not exceed £40,000 no annual allowance tax charge is due.

An alternative annual allowance of £36,000 applies to the defined benefit savings but is only required where the annual allowance is exceeded.

saucer

Another good outline of this information here.  https://www.thisismoney.co.uk/money/pensions/article-9951889/How-NHS-pension-affected-rigger-MPAA.html

Albermarle

jscol said:

Or in theory could we ask our IFA to ask RL to split it into 3 small pots and hopefully one bigger pot nearer the time? I don't understand the small pot rule particularly well. 

Reading the thread again I am not sure the small pot route will be of any real benefit to her anyway, so maybe a red herring.

QrizB

Considering

jscol said:

At present we put just under £5k per year into this pension and it's at least 8 years away from being claimed

and

Or in theory could we ask our IFA to ask RL to split it into 3 small pots and hopefully one bigger pot nearer the time?

Have you considered opening three additional, separate pensions and paying some of your annual contributions into those instead of the RL fund, so you end up with three small pots without needing to split the current one?

Albermarle

Have you considered opening three additional, separate pensions and paying some of your annual contributions into those instead of the RL fund, so you end up with three small pots without needing to split the current one?

I did that but you have to be careful, as some providers have no facility at all for making small pot withdrawals, Vanguard for one AFAIK .

jscol

In haven't thought about this but I suspect I should. 
I could open 1 to 3 SIPPS in my wife's name. Get the benefit of tax relief (she's a 20% tax payer) and take the cash when she's 57.
This seems a bit of a no brained for anyone with a public sector pension and the potential to save a bit more?
Are there any pitfalls that I am missing? 
I will exceed LTA in next few years so can only do this in my wife's name.