SIPP payments and tax free cash

CoffeeLover

Apologies for the seemingly daft question. I'm nearing 55 and thinking of taking tax free cash from one scheme. But what happens to the other 75%, does that get converted into a SIPP? I also have about 5 small ex-employer DC pensions that I would like to consolidate, can they be rolled into the above SIPP, or would I need to organise my own with HL or some other firm? And does taking tax free cash restrict what I can do with the remaining pensions in terms of consolidation? Thanks.

Albermarle

If you have a reasonably modern pension, then when you take the 25% tax free, the remaining 75% stays where it is.
The difference is that is now 'crystallised' which means in effect any income you take from it is potentially taxable.

If you have an older scheme that does not support drawdown, you would have to transfer it to one that did. It is better/easier to do this before taking the 25% tax free.

Some providers may just transfer you internally to a new pension, or more likely you will have to organise a transfer out yourself ( normally very easy on line nowadays)

Probably best to first check what your existing pensions offer in terms of drawdown facility, then you can think about the best way to consolidate them. Some have good explanations on their websites. It may be one or more of the existing pensions is OK and you can transfer the others into them ( if they allow transfers in , they usually do ). 

And does taking tax free cash restrict what I can do with the remaining pensions in terms of consolidation? 
In theory no, but in practice it is easier to transfer an uncrystallised pot ( before any tax free cash is taken )

I think a free session with PensionWise would be a good idea for you .
Pension Wise: free pension guidance | MoneyHelper

CoffeeLover

Thank you for the reply. I do have a session booked in with Pension Wise, I just want to ensure that have a bit of background on options before I have that conversation.

Albermarle

CoffeeLover said:

Thank you for the reply. I do have a session booked in with Pension Wise, I just want to ensure that have a bit of background on options before I have that conversation.

If not already done so, get up to speed with the details of the pensions you have. The issue is that although various withd rawal options are available, not all providers offer them. This is mainly with older pensions with older IT systems/procedures.

Steve_666_

If you take 25% and crystallise the rest, DO NOT drawdown a single penny from the crystalised pension until after you are retired. You will otherwise trigger  MPAA and restricted all future pension contributions to 4K per year.

CoffeeLover

Thanks for the response. Yes, I had read similar elsewhere, but good to have the confirmation. The pension in question does have some protected tax free cash, so my 25% might be more like 30%, I expect my pension provider to provide the exact amount.

gm0

Before the pensionwise call. It is helpful to have fairly current statements and scheme guides.
Most providers do start to send wake up packs to people as they approach access age. But some will need a nudge.
Reading this slightly stilted documents may inform questions for the call.

What is allowed under pension freedoms (legally and then regulation) is quite a wide range
PensionWise cover the mainstream part of this at a superficial explanation of terms level
What an old scheme supports around drawdown may well be a lot less.
But you can transfer somewhere that does support the version you want
Transfer out can be hampered for a minority by valuable protected terms triggering a mandatory advice requirement

There is no good rule of thumb on whether you should transfer or not.  The range of investments, costs, access methods and other terms you have for your schemes and memberships will dictate. Legacy is neither good nor bad. Generalisations can mislead.