Question about Crystallisation and Future Pensions contributions

Lismac

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?

LHW99

As long as you only take the tax-free amounts.

If you take even 1p of the taxable 75% you trigger the MPAA

Lismac

Thank you LHW99

MetaPhysical

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.

FIREDreamer

MetaPhysical said:

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

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

Albermarle said:

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

FIREDreamer said:

MetaPhysical said:

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.

FIREDreamer said:

MetaPhysical said:

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

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

FIREDreamer said:

@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

I think you need to tell your pension provider you are withdrawing under the small pots rule - and not all of them support it.