Advice On Small Pension Pot

slpierce

Hello all

I have a small private pension pot that I haven't paid into for many years, what's the quickest most tax efficient way of getting access to 100% of it once I reach 55 yrs old next year? basically I want to move all the cash I have in there and into my bank the quickest and most efficient way possible.

Thanks

Dazed_and_C0nfused

slpierce said:

Hello all

I have a small private pension pot that I haven't paid into for many years, what's the quickest most tax efficient way of getting access to 100% of it once I reach 55 yrs old next year? basically I want to move all the cash I have in there and into my bank the quickest and most efficient way possible.

Thanks

Is it in cash or is it invested?

75% of it will be taxable income so the amount of tax payable will depend on how much that 75% is and what other taxable income you have.

You might end up having to pay £0 tax.  Or it could be 60% if you get caught in the tapered Personal Allowance trap.

Really not info available to say more.

xylophone

Was this an occupational pension or a personal pension?

Where is it at the moment?

What is the value?

Are you currently a basic rate/higher rate tax payer?

Have you other pension provision?

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

enthusiasticsaver

Depends on the value of the pot and your tax status. If you have already used your personal allowance you will need to pay tax at your marginal rate on 75% of the pot. If the pension is a DB pension you won’t be able to access anyway and may need to pay for advice before moving to a pension you can access. 

Albermarle

slpierce said:

Hello all

I have a small private pension pot that I haven't paid into for many years, what's the quickest most tax efficient way of getting access to 100% of it once I reach 55 yrs old next year? basically I want to move all the cash I have in there and into my bank the quickest and most efficient way possible.

Thanks

We have no idea of your financial circumstances, but as a general rule it is better to leave a pension alone unless you are desperate for the cash.

slpierce

Thanks for all your replies, and apologies I didn't give enough info.

It's a personal pension pot worth 71k at the last evaluation at Feb this year, I have not contributed to the pot for a decade or so, It just sits there growing slowly over the years I'm 54 yrs old, my basic salary is £40K so I pay 20% Income tax atm, I'm in good health and plan on working for many more years, I wont need to use this pension pot as a retirement income.

House is almost paid for so have around £450K equity in that, no Credit cards or loans, Wife works for the government and could retires next year on very good pension. 

Thanks in advance for any advice.

Linton

slpierce said:

Thanks for all your replies, and apologies I didn't give enough info.

It's a personal pension pot worth 71k at the last evaluation at Feb this year, I have not contributed to the pot for a decade or so, It just sits there growing slowly over the years I'm 54 yrs old, my basic salary is £40K so I pay 20% Income tax atm, I'm in good health and plan on working for many more years, I wont need to use this pension pot as a retirement income.

House is almost paid for so have around £450K equity in that, no Credit cards or loans, Wife works for the government and could retires next year on very good pension. 

Thanks in advance for any advice.

A small pot is £30k or less so unless your £71K figure was a typo you can’t simply use the small pot rule.

If your personal pension is many years old it may well not support drawdown - you should check with the provider.  In that case the only way of accessing it as cash would be to transfer it to a modern pension.

25% is tax free leaving about £53K taxable. If you took all of the money in one tax year your £40K salary would leave about £43K taxed at 40%. To avoid higher rate tax you would have to spread the drawdown over several years.

Sarahspangles

slpierce said:

Thanks for all your replies, and apologies I didn't give enough info.

It's a personal pension pot worth 71k at the last evaluation at Feb this year, I have not contributed to the pot for a decade or so, It just sits there growing slowly over the years I'm 54 yrs old, my basic salary is £40K so I pay 20% Income tax atm, I'm in good health and plan on working for many more years, I wont need to use this pension pot as a retirement income.

House is almost paid for so have around £450K equity in that, no Credit cards or loans, Wife works for the government and could retires next year on very good pension. 

Thanks in advance for any advice.

Is it that you want more control over the 'pot' or do you need the capital? You could move it into a more modern pension, which would include a SIPP as an option. Then take it from 55 if you need the capital, or leave in in place in case there's a year you want to use it as salary replacement before other pensions come on stream. In that year you could take your personal allowance i.e. £12,570 and pay no tax on it plus take some or all of the 25% tax free.

QrizB

Linton said:

slpierce said:

It's a personal pension pot worth 71k at the last evaluation at Feb this year

25% is tax free leaving about £53K taxable. If you took all of the money in one tax year your £40K salary would leave about £43K taxed at 40%. To avoid higher rate tax you would have to spread the drawdown over several years.

So (in round numbers) you'd get £18k tax-free, pay £2k tax on £10k and £17k tax on the remaining £43k.

This would give you £52k in your pocket and £19k to the Exchequer.

Alternatively, you could take the £18k tax-free then spread the rest out over 5 years, avoiding the 40% tax band and saving £8k in tax.

How desperate are you to get this into your bank account? Is your need urgent enough that you're happy to pay £8k to do it?

Albermarle

slpierce said:

Thanks for all your replies, and apologies I didn't give enough info.

It's a personal pension pot worth 71k at the last evaluation at Feb this year, I have not contributed to the pot for a decade or so, It just sits there growing slowly over the years I'm 54 yrs old, my basic salary is £40K so I pay 20% Income tax atm, I'm in good health and plan on working for many more years, I wont need to use this pension pot as a retirement income.

House is almost paid for so have around £450K equity in that, no Credit cards or loans, Wife works for the government and could retires next year on very good pension. 

Thanks in advance for any advice.

You still have not said why you want to withdraw it, is there a specific reason ?

Ciprico

I think a small pot has to be less than 10k though you can have three of them... Which is subtly different to a single pot of 30k.