Small Pots Rule....

DE_612183

For personal pensions, up to three pots worth up to £10,000 each can also be cashed in under the ‘small pots’ rules.

So am I right in thinking that if I take out 3 new personal pensions with different providers, and then transfer, say £9k into to ( to allow for a bit of growth! )

I can then cash in each of those pots, thus getting £27k tax free?

I can then also take 25% of any other pot I have also tax free?

I don't think this is right - otherwise everyone would do it - but I can't see how the loophole is closed?

Silvertabby

Only 25% of each 'small pot' is tax free.  

dunstonh

I can then cash in each of those pots, thus getting £27k tax free?

No.  75% would be taxable and 25% tax free.  Just as normal.

NoMore

A common misconception, people seem to think the 10k from a small pot is tax free, its not as Silvertabby says, its still 25% tax free, 75% taxable.

The advantage of small pots, is they don't trigger the MPAA and don't use up any of the LTA or the new tax free lump sum allowance.

You also don't necessarily need to create new pension pots to do this, there are providers who allow you to withdraw from a larger pot using the small pots rule (only 3 times as per the rules) without recourse to creating a new account.

Albermarle

If you start 3 new pots, make sure the pension provider can facilitate withdrawals under the small pot rule.
Some can/will not - Vanguard for one.

Ciprico

...I haven't tested yet, but I believe Hargreaves Lansdown will let you easily hive off 10K of your main SIPP into a virtual small pot and take it. (potentially saves setting up multiple new accounts). As above Vanguard don't support small pots. I did successfully cash in a small pot with Fidelity.