Small pots rule

shortseller09

Hi, I am pretty certain that if, hypothetically, one has taken maximum tax-free cash of £268,275, then taking a small pot would be fully taxable. Just can't see this specifically stated anywhere online, would appreciate confirmation.

dunstonh

Small pots are outside of the lifetime allowance calculations.

So, you would still get your 25% TFC from a small pot.

Marcon

shortseller09 said:

Hi, I am pretty certain that if, hypothetically, one has taken maximum tax-free cash of £268,275, then taking a small pot would be fully taxable. Just can't see this specifically stated anywhere online, would appreciate confirmation.

....and taking a small pot under the small pots regime doesn't trigger the MPAA, which is also handy!

Pat38493

Marcon said:

shortseller09 said:

Hi, I am pretty certain that if, hypothetically, one has taken maximum tax-free cash of £268,275, then taking a small pot would be fully taxable. Just can't see this specifically stated anywhere online, would appreciate confirmation.

....and taking a small pot under the small pots regime doesn't trigger the MPAA, which is also handy!

So if I told my pension provider to send 30K of my money to 3 separate SIPP accounts and then take them all as small pots, this wouldn’t be illegal? (Assuming the provider agreed to do it).

Dazed_and_C0nfused

Pat38493 said:

Marcon said:

shortseller09 said:

Hi, I am pretty certain that if, hypothetically, one has taken maximum tax-free cash of £268,275, then taking a small pot would be fully taxable. Just can't see this specifically stated anywhere online, would appreciate confirmation.

....and taking a small pot under the small pots regime doesn't trigger the MPAA, which is also handy!

So if I told my pension provider to send 30K of my money to 3 separate SIPP accounts and then take them all as small pots, this wouldn’t be illegal? (Assuming the provider agreed to do it).

Apparently Hargreaves Lansdown are happy to oblige.

Albermarle

An alternative if still having earned income, is to set up three new DC pensions/SIPP's and add around £7500 to each . Tax relief of £1875 will be added to give £9375, which gives some room for growth if you do not take them for a year or two.
Only point to watch is that not all pension providers will facilitate withdrawals under the small pots rules.
HL and AJ Bell will, Vanguard will not ( for example)

Pat38493

Albermarle said:

An alternative if still having earned income, is to set up three new DC pensions/SIPP's and add around £7500 to each . Tax relief of £1875 will be added to give £9375, which gives some room for growth if you do not take them for a year or two.
Only point to watch is that not all pension providers will facilitate withdrawals under the small pots rules.
HL and AJ Bell will, Vanguard will not ( for example)

OK but what is the advantage?  If I want to take a taxable withdrawal without triggering the MPAA?  And the tax free cash doesn’t count towards the LTA/Tax free total?

Albermarle

Pat38493 said:

Albermarle said:

An alternative if still having earned income, is to set up three new DC pensions/SIPP's and add around £7500 to each . Tax relief of £1875 will be added to give £9375, which gives some room for growth if you do not take them for a year or two.
Only point to watch is that not all pension providers will facilitate withdrawals under the small pots rules.
HL and AJ Bell will, Vanguard will not ( for example)

OK but what is the advantage?  If I want to take a taxable withdrawal without triggering the MPAA?  And the tax free cash doesn’t count towards the LTA/Tax free total?

Well I did it as it would have meant almost £30K not counting to towards the LTA, although that has become irrelevant now.
However the two points you mention are still valid, if they are likely to affect you.

shortseller09

Thanks for the responses, I had been given incorrect information by HL, good job I came on here to check before acting upon it.

Very unimpressed with their pensions helpdesk.