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Question about Crystallisation and Future Pensions contributions

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I have 3 different pension pots - 2 that are dormant and 1 that I am currently paying into via salary sacrifice.

If I were to take out 25% of the 2 pension pots that are currently dormant, could I continue to contribute the maximum £60K a year into my current work pension pot?

Comments

  • LHW99
    LHW99 Posts: 5,223 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    As long as you only take the tax-free amounts.
    If you take even 1p of the taxable 75% you trigger the MPAA
  • Lismac
    Lismac Posts: 20 Forumite
    Third Anniversary 10 Posts Name Dropper
    Thank you LHW99
  • Be careful Lismac.  I have known many fall foul of this, thinking that "surely the rule can't be as black and white as that?".  Alas, it is.  As LHW said, any withdrawal whatsoever from your 75% in any of your pots triggers the MPAA and a maximum thereon in of 10k per year in contributions.  It's a ridiculously harsh rule but that's what it is.
  • Be careful Lismac.  I have known many fall foul of this, thinking that "surely the rule can't be as black and white as that?".  Alas, it is.  As LHW said, any withdrawal whatsoever from your 75% in any of your pots triggers the MPAA and a maximum thereon in of 10k per year in contributions.  It's a ridiculously harsh rule but that's what it is.
    @Lismac you can of course take up to three small pots of a maximum of £10,000 each - 75% taxable and 25% tax free (even though this isn’t a PCLS).

    This doesn’t invoke the MPAA.
  • Albermarle
    Albermarle Posts: 27,808 Forumite
    10,000 Posts Seventh Anniversary Name Dropper
    Lismac said:
    I have 3 different pension pots - 2 that are dormant and 1 that I am currently paying into via salary sacrifice.

    If I were to take out 25% of the 2 pension pots that are currently dormant, could I continue to contribute the maximum £60K a year into my current work pension pot?
    It is very unlikely that the two older pots are dormant. Most likely they will still be invested, and the values fluctuating. Plus annual charges. Just because you are not contributing to them anymore does not make them dormant.
  • Lismac
    Lismac Posts: 20 Forumite
    Third Anniversary 10 Posts Name Dropper
    Lismac said:
    I have 3 different pension pots - 2 that are dormant and 1 that I am currently paying into via salary sacrifice.

    If I were to take out 25% of the 2 pension pots that are currently dormant, could I continue to contribute the maximum £60K a year into my current work pension pot?
    It is very unlikely that the two older pots are dormant. Most likely they will still be invested, and the values fluctuating. Plus annual charges. Just because you are not contributing to them anymore does not make them dormant.
    Yes of course they are still active in the fact that they are still invested, by dormant I mean I am not currently paying into them.
  • Lismac
    Lismac Posts: 20 Forumite
    Third Anniversary 10 Posts Name Dropper
    Be careful Lismac.  I have known many fall foul of this, thinking that "surely the rule can't be as black and white as that?".  Alas, it is.  As LHW said, any withdrawal whatsoever from your 75% in any of your pots triggers the MPAA and a maximum thereon in of 10k per year in contributions.  It's a ridiculously harsh rule but that's what it is.
    @Lismac you can of course take up to three small pots of a maximum of £10,000 each - 75% taxable and 25% tax free (even though this isn’t a PCLS).

    This doesn’t invoke the MPAA.
    Be careful Lismac.  I have known many fall foul of this, thinking that "surely the rule can't be as black and white as that?".  Alas, it is.  As LHW said, any withdrawal whatsoever from your 75% in any of your pots triggers the MPAA and a maximum thereon in of 10k per year in contributions.  It's a ridiculously harsh rule but that's what it is.
    @Lismac you can of course take up to three small pots of a maximum of £10,000 each - 75% taxable and 25% tax free (even though this isn’t a PCLS).

    This doesn’t invoke the MPAA.
    Thank you - they are bigger than £10K each and it is likely I would only need to take 20% of the two pots. I was just concerned how that would affect my ongoing contributions into my other pot, but it seems like all will be okay.
  • jamesd
    jamesd Posts: 26,103 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    You can combine and split pots to get to exactly £10k each. Hargreaves Lansdown has the convenience feature of doing it behind the scenes.

    When it comes to the 25% the actual rule is up to 25%. Take less and you can't take the rest later. The correct way to do it is to take 25% of a sufficient portion of the pot to meet your objective and leave part uncrystallised, 75% of another part in flexi-access drawdown and the 25% of that in your bank account.
  • TJ666
    TJ666 Posts: 23 Forumite
    Part of the Furniture 10 Posts Name Dropper Combo Breaker

    @Lismac you can of course take up to three small pots of a maximum of £10,000 each - 75% taxable and 25% tax free (even though this isn’t a PCLS).

    This doesn’t invoke the MPAA.
    @FIREDreamer Thanks for this info, first I'd heard of it.  DO you have to do anything special in order to not trigger the MPAA, or just follow the rules of drawing only 3 small pots ?  I was planning on drawing about £4k as UFPLS before the end of the tax year to maximise my tax personal allowance (and do the same annually going forward).  This is the first time I'm drawing a pension (via Vanguard SIPP).  I don't intend to work and pay into a pension again, but worth keeping my options open for  3 more years.  
  • MallyGirl
    MallyGirl Posts: 7,201 Senior Ambassador
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    I think you need to tell your pension provider you are withdrawing under the small pots rule - and not all of them support it.
    I’m a Senior Forum Ambassador and I support the Forum Team on the Pensions, Annuities & Retirement Planning, Loans
    & Credit Cards boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com.
    All views are my own and not the official line of MoneySavingExpert.
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