small pot lump sum pension isssue

susanna1

In 2019 i cashed in a small pot lump sump from Aviva (Friends Life Ltd/Friends provident). It was a Minimum Contribution Plan Life Assured for me on a single life basis as a personal pension plan. It was a contracted out premium with Profit (4) whatever that means. I was contracted out of the additional state pension known as SERPS /Second State Pension.I started it in 1996 and stopped paying into in 2000. It consisted of 4 account numbers. When I applied to withdraw the amount as a small pot lump sum the whole amount was approx £5,200. It stated that approx £700 had been deducted for tax which had been paid by them to HMRC.  It reminded me that I was only allowed 3 small pot pensions "including this One".  Recently I registered onto HMRC online. I found that the one pot had been split into 4 parts to show each amount taxed. I had another small pot lump sum  from RNPFN. I had paid a single premium  of £1000 into a Liberty Personal Pension Plan in 1996 and didnt add any more money to it which I cashed in in 2018/2019. This was also classed under the small pots pension rule and appeared on HMRC site as a single payment.

I am now taking a small pot lump sum from Royal London which should total about £3300 after tax.  Will HMRC class this as a  pot over the 3 allowed  in view of the 4 box totals they have of Avivas payment for the 2 smaller amounts and 2 larger amounts..  Money wise stated that it would be within the 3 pot rule last time I rang them. But when i spoke to them I hadnt accessed the HMRC website as far back as payments made prior to 2021 as Id had no need. My financial adviser cant understand why Aviva plan was spit into 4 parts. I have till monday to inform Royal London what I want to do.  Can anyone could explain why HMRC needed to do 4 seperate boxes. Is it becasuse there was sub/sections and trenchers though I have no idea what these would be?

Marcon

susanna1 said:

In 2019 i cashed in a small pot lump sump from Aviva (Friends Life Ltd/Friends provident). It was a Minimum Contribution Plan Life Assured for me on a single life basis as a personal pension plan. It was a contracted out premium with Profit (4) whatever that means. I was contracted out of the additional state pension known as SERPS /Second State Pension.I started it in 1996 and stopped paying into in 2000. It consisted of 4 account numbers. When I applied to withdraw the amount as a small pot lump sum the whole amount was approx £5,200. It stated that approx £700 had been deducted for tax which had been paid by them to HMRC.  It reminded me that I was only allowed 3 small pot pensions "including this One".  Recently I registered onto HMRC online. I found that the one pot had been split into 4 parts to show each amount taxed. I had another small pot lump sum  from RNPFN. I had paid a single premium  of £1000 into a Liberty Personal Pension Plan in 1996 and didnt add any more money to it which I cashed in in 2018/2019. This was also classed under the small pots pension rule and appeared on HMRC site as a single payment.

I am now taking a small pot lump sum from Royal London which should total about £3300 after tax.  Will HMRC class this as a  pot over the 3 allowed  in view of the 4 box totals they have of Avivas payment for the 2 smaller amounts and 2 larger amounts..  Money wise stated that it would be within the 3 pot rule last time I rang them. But when i spoke to them I hadnt accessed the HMRC website as far back as payments made prior to 2021 as Id had no need. My financial adviser cant understand why Aviva plan was spit into 4 parts. I have till monday to inform Royal London what I want to do.  Can anyone could explain why HMRC needed to do 4 seperate boxes. Is it becasuse there was sub/sections and trenchers though I have no idea what these would be?

Then why didn't your FA check direct with Aviva if they didn't understand something? From the dates you mention, it sounds as if it was set up as a segmented personal pension - very common in 'those days' because it meant the planholder could take 25% cash from one segment after another, leaving the remaining 75% invested pending the purchase of an annuity at their preferred point in time. Has your adviser considered that obvious possibility?

Unclear from your posts how many pots you've taken. Looking at https://forums.moneysavingexpert.com/discussion/6241026/group-personal-pension-plan#latest you have said:

'My concern was that as Group personal pension plan through my emoployer, once i left the job did it become a personal penison plan meaning that as a DC I could only take it if I was within the 3 pot rule which I have already used up.'

It was always a personal pension; being part of a group PP didn't make it an occupational scheme.

Why are you so concerned about using the small pots rule? Are you planning to contribute more than £10K a year to your pension in future years? If not, then what's the issue - hopefully it might just be a simple misunderstanding and there's no need to be worried about small pots.

susanna1

Marcon said:

susanna1 said:

In 2019 i cashed in a small pot lump sump from Aviva (Friends Life Ltd/Friends provident). It was a Minimum Contribution Plan Life Assured for me on a single life basis as a personal pension plan. It was a contracted out premium with Profit (4) whatever that means. I was contracted out of the additional state pension known as SERPS /Second State Pension.I started it in 1996 and stopped paying into in 2000. It consisted of 4 account numbers. When I applied to withdraw the amount as a small pot lump sum the whole amount was approx £5,200. It stated that approx £700 had been deducted for tax which had been paid by them to HMRC.  It reminded me that I was only allowed 3 small pot pensions "including this One".  Recently I registered onto HMRC online. I found that the one pot had been split into 4 parts to show each amount taxed. I had another small pot lump sum  from RNPFN. I had paid a single premium  of £1000 into a Liberty Personal Pension Plan in 1996 and didnt add any more money to it which I cashed in in 2018/2019. This was also classed under the small pots pension rule and appeared on HMRC site as a single payment.

I am now taking a small pot lump sum from Royal London which should total about £3300 after tax.  Will HMRC class this as a  pot over the 3 allowed  in view of the 4 box totals they have of Avivas payment for the 2 smaller amounts and 2 larger amounts..  Money wise stated that it would be within the 3 pot rule last time I rang them. But when i spoke to them I hadnt accessed the HMRC website as far back as payments made prior to 2021 as Id had no need. My financial adviser cant understand why Aviva plan was spit into 4 parts. I have till monday to inform Royal London what I want to do.  Can anyone could explain why HMRC needed to do 4 seperate boxes. Is it becasuse there was sub/sections and trenchers though I have no idea what these would be?

Then why didn't your FA check direct with Aviva if they didn't understand something? From the dates you mention, it sounds as if it was set up as a segmented personal pension - very common in 'those days' because it meant the planholder could take 25% cash from one segment after another, leaving the remaining 75% invested pending the purchase of an annuity at their preferred point in time. Has your adviser considered that obvious possibility?

Unclear from your posts how many pots you've taken. Looking at https://forums.moneysavingexpert.com/discussion/6241026/group-personal-pension-plan#latest you have said:

'My concern was that as Group personal pension plan through my emoployer, once i left the job did it become a personal penison plan meaning that as a DC I could only take it if I was within the 3 pot rule which I have already used up.'

It was always a personal pension; being part of a group PP didn't make it an occupational scheme.

Why are you so concerned about using the small pots rule? Are you planning to contribute more than £10K a year to your pension in future years? If not, then what's the issue - hopefully it might just be a simple misunderstanding and there's no need to be worried about small pots.

Marcon said:

susanna1 said:

In 2019 i cashed in a small pot lump sump from Aviva (Friends Life Ltd/Friends provident). It was a Minimum Contribution Plan Life Assured for me on a single life basis as a personal pension plan. It was a contracted out premium with Profit (4) whatever that means. I was contracted out of the additional state pension known as SERPS /Second State Pension.I started it in 1996 and stopped paying into in 2000. It consisted of 4 account numbers. When I applied to withdraw the amount as a small pot lump sum the whole amount was approx £5,200. It stated that approx £700 had been deducted for tax which had been paid by them to HMRC.  It reminded me that I was only allowed 3 small pot pensions "including this One".  Recently I registered onto HMRC online. I found that the one pot had been split into 4 parts to show each amount taxed. I had another small pot lump sum  from RNPFN. I had paid a single premium  of £1000 into a Liberty Personal Pension Plan in 1996 and didnt add any more money to it which I cashed in in 2018/2019. This was also classed under the small pots pension rule and appeared on HMRC site as a single payment.

I am now taking a small pot lump sum from Royal London which should total about £3300 after tax.  Will HMRC class this as a  pot over the 3 allowed  in view of the 4 box totals they have of Avivas payment for the 2 smaller amounts and 2 larger amounts..  Money wise stated that it would be within the 3 pot rule last time I rang them. But when i spoke to them I hadnt accessed the HMRC website as far back as payments made prior to 2021 as Id had no need. My financial adviser cant understand why Aviva plan was spit into 4 parts. I have till monday to inform Royal London what I want to do.  Can anyone could explain why HMRC needed to do 4 seperate boxes. Is it becasuse there was sub/sections and trenchers though I have no idea what these would be?

Then why didn't your FA check direct with Aviva if they didn't understand something? From the dates you mention, it sounds as if it was set up as a segmented personal pension - very common in 'those days' because it meant the planholder could take 25% cash from one segment after another, leaving the remaining 75% invested pending the purchase of an annuity at their preferred point in time. Has your adviser considered that obvious possibility?

Unclear from your posts how many pots you've taken. Looking at https://forums.moneysavingexpert.com/discussion/6241026/group-personal-pension-plan#latest you have said:

'My concern was that as Group personal pension plan through my emoployer, once i left the job did it become a personal penison plan meaning that as a DC I could only take it if I was within the 3 pot rule which I have already used up.'

It was always a personal pension; being part of a group PP didn't make it an occupational scheme.

Why are you so concerned about using the small pots rule? Are you planning to contribute more than £10K a year to your pension in future years? If not, then what's the issue - hopefully it might just be a simple misunderstanding and there's no need to be worried about small pots.

Appreciate your response. A FA involved at the time through my RCN membership said to see what HMRC did with the payments once hed seen that it had 4 parts  which he expalined about. On withdrawl 2 were small amounts and the other two  over £1000 each. He stated that he could do no more as hed come to see me on another matter entirely. The P45 stated the full amount and the total tax taken off. The letter from them aslo stated it was "1 pot". The FA through RCN said that could be misleading depending what HMRC did. The small pot lump sum from RNPFN was likewise once stated by Pensionwise that it was included within 3 pot rule while another conversation stated it was exluded. Fortunately the paperwork from RNPFN did state it was classed as belonging to the 3 pot rule.   Since I got advice on the other post you highlighted I  contacted Pensionwise  more recently and was told that I had not drawn 3 pots yet and that the Aviva one would possibly have been only 1 pot and that I should be able to draw the Royal London amount within the 3 pot rule. What has confused the issue for me since is why would HMRC split the amount from Aviva as it is now into 4 seperate boxes on HMRC online. Had I seen this before now I would have asked the question to Pensionwise. I am trying to understand if there has been some misunderstanding in  my phonecalls to Pensionwise because if I fall foul of the 3 pot rule in withdrawing the amount from Royal London  Im aware that there will be a fine involved. What would this fine be..just to pay tax on full amount or to pay tax on the previous amounts where 25% was not taxed? Since Jan I have been unable to obtain contact with Pensionwise to acertain what is actually correct. I am already drawing my NHS pension and my state pension starts in autumn of 2025. As it is a weekend and Royal London cant deal with any withdrawls after monday I am really trying to sort this now. I do not want any other pension payments  moving forwards for tax reasons from 2025. The FA now involved is very good but was not able to contact AVIVA this weekend and is unavaliable for a week or so. I am goign to contact Aviva on monday but as the account was closed on withdrawl dont they only keep records for a few months. Bearing in mind it was 2019 at that time. Appreciate one option would be drawdown and get a lump sum that way so I didnt use the 3 pot rule for it but i do not understand the ins and outs. Pensionwise once mentioned trivial commutation/DC and the other contribuiton type and to check with Royal London about something specific but Royal London answered in the negative which  resulted in my recontacting Pensionwise who then stated as Id possibly not used 3 pots yet it wasnt an issue if that was the case. I feel im just going in circles at the mo.

FIREDreamer

susanna1 said:

Marcon said:

susanna1 said:

In 2019 i cashed in a small pot lump sump from Aviva (Friends Life Ltd/Friends provident). It was a Minimum Contribution Plan Life Assured for me on a single life basis as a personal pension plan. It was a contracted out premium with Profit (4) whatever that means. I was contracted out of the additional state pension known as SERPS /Second State Pension.I started it in 1996 and stopped paying into in 2000. It consisted of 4 account numbers. When I applied to withdraw the amount as a small pot lump sum the whole amount was approx £5,200. It stated that approx £700 had been deducted for tax which had been paid by them to HMRC.  It reminded me that I was only allowed 3 small pot pensions "including this One".  Recently I registered onto HMRC online. I found that the one pot had been split into 4 parts to show each amount taxed. I had another small pot lump sum  from RNPFN. I had paid a single premium  of £1000 into a Liberty Personal Pension Plan in 1996 and didnt add any more money to it which I cashed in in 2018/2019. This was also classed under the small pots pension rule and appeared on HMRC site as a single payment.

I am now taking a small pot lump sum from Royal London which should total about £3300 after tax.  Will HMRC class this as a  pot over the 3 allowed  in view of the 4 box totals they have of Avivas payment for the 2 smaller amounts and 2 larger amounts..  Money wise stated that it would be within the 3 pot rule last time I rang them. But when i spoke to them I hadnt accessed the HMRC website as far back as payments made prior to 2021 as Id had no need. My financial adviser cant understand why Aviva plan was spit into 4 parts. I have till monday to inform Royal London what I want to do.  Can anyone could explain why HMRC needed to do 4 seperate boxes. Is it becasuse there was sub/sections and trenchers though I have no idea what these would be?

Then why didn't your FA check direct with Aviva if they didn't understand something? From the dates you mention, it sounds as if it was set up as a segmented personal pension - very common in 'those days' because it meant the planholder could take 25% cash from one segment after another, leaving the remaining 75% invested pending the purchase of an annuity at their preferred point in time. Has your adviser considered that obvious possibility?

Unclear from your posts how many pots you've taken. Looking at https://forums.moneysavingexpert.com/discussion/6241026/group-personal-pension-plan#latest you have said:

'My concern was that as Group personal pension plan through my emoployer, once i left the job did it become a personal penison plan meaning that as a DC I could only take it if I was within the 3 pot rule which I have already used up.'

It was always a personal pension; being part of a group PP didn't make it an occupational scheme.

Why are you so concerned about using the small pots rule? Are you planning to contribute more than £10K a year to your pension in future years? If not, then what's the issue - hopefully it might just be a simple misunderstanding and there's no need to be worried about small pots.

Marcon said:

susanna1 said:

In 2019 i cashed in a small pot lump sump from Aviva (Friends Life Ltd/Friends provident). It was a Minimum Contribution Plan Life Assured for me on a single life basis as a personal pension plan. It was a contracted out premium with Profit (4) whatever that means. I was contracted out of the additional state pension known as SERPS /Second State Pension.I started it in 1996 and stopped paying into in 2000. It consisted of 4 account numbers. When I applied to withdraw the amount as a small pot lump sum the whole amount was approx £5,200. It stated that approx £700 had been deducted for tax which had been paid by them to HMRC.  It reminded me that I was only allowed 3 small pot pensions "including this One".  Recently I registered onto HMRC online. I found that the one pot had been split into 4 parts to show each amount taxed. I had another small pot lump sum  from RNPFN. I had paid a single premium  of £1000 into a Liberty Personal Pension Plan in 1996 and didnt add any more money to it which I cashed in in 2018/2019. This was also classed under the small pots pension rule and appeared on HMRC site as a single payment.

I am now taking a small pot lump sum from Royal London which should total about £3300 after tax.  Will HMRC class this as a  pot over the 3 allowed  in view of the 4 box totals they have of Avivas payment for the 2 smaller amounts and 2 larger amounts..  Money wise stated that it would be within the 3 pot rule last time I rang them. But when i spoke to them I hadnt accessed the HMRC website as far back as payments made prior to 2021 as Id had no need. My financial adviser cant understand why Aviva plan was spit into 4 parts. I have till monday to inform Royal London what I want to do.  Can anyone could explain why HMRC needed to do 4 seperate boxes. Is it becasuse there was sub/sections and trenchers though I have no idea what these would be?

Then why didn't your FA check direct with Aviva if they didn't understand something? From the dates you mention, it sounds as if it was set up as a segmented personal pension - very common in 'those days' because it meant the planholder could take 25% cash from one segment after another, leaving the remaining 75% invested pending the purchase of an annuity at their preferred point in time. Has your adviser considered that obvious possibility?

Unclear from your posts how many pots you've taken. Looking at https://forums.moneysavingexpert.com/discussion/6241026/group-personal-pension-plan#latest you have said:

'My concern was that as Group personal pension plan through my emoployer, once i left the job did it become a personal penison plan meaning that as a DC I could only take it if I was within the 3 pot rule which I have already used up.'

It was always a personal pension; being part of a group PP didn't make it an occupational scheme.

Why are you so concerned about using the small pots rule? Are you planning to contribute more than £10K a year to your pension in future years? If not, then what's the issue - hopefully it might just be a simple misunderstanding and there's no need to be worried about small pots.

The FA involved at the time through my RCN membership said to see what HMRC did with the payments. The P45 stated the full amount and the total tax taken off. The letter from them aslo stated it was "1 pot". Since I got advice on the other post you highlighted I  contacted Pensionwise  more recently and was told that I had not drawn 3 pots yet. That i could draw the Royal London amount within the 3 pot rule. What has confused the issue for me since is why would HMRC split the amount from RNPFN into 4 seperate boxes on HMRC online. Had I seen this before now I would have asked the question to Pensionwise.I am trying to understand if there has been some misunderstanding in  my phonecalls to Pensionwise because if I fall foul of the 3 pot rule in withdrawing the amount from Royal London  Im told by them that there will be a fine involved. What would this fine be..just to pay tax on full amount or to pay tax on the previous amounts where 25% was not taxed? Since Jan I have been unable to obtain contact with Pensionwise to acertain what is actually correct. I am already drawing my NHS pension and my state pension starts in autumn of 2025. As it is a weekend and Royal London cant deal with any withdrawls after monday I am really trying to sort this now. I do not want any other pension payments  moving forwards for tax reasons from 2025. The FA now involved that you mention was not able to contact AVIVA this weekend. I am goign to contact Aviva on monday but as the account was closed on withdrawl dont they only keep records for a few months. Bearing in mind it was 2019 at that time.

Whereabouts in HMRC on line do you see your small pot details?

Thanks

molerat

As Marcon has asked, why are you so focussed on the small pots regulations ?

Small pots is not so much about how many pensions you can withdraw from but what you can pay into a money purchase scheme once you have breached the 3 pots.  If you have not exceeded the MPAA since taking those "maybe 4" pots and will not do so in the future then there is no problem.

susanna1

Hi Thanks, Ps My writing error re 4 amounts. It was actually Aviva that had 4 amounts, not RNPFN. I am not paying into any other policies and my understanding is that the 3 pots rule applies to  how many pots you are obtaining cash amounts in full from  in small pot lump sums. This is all anyone has ever focused on whom i have spoken with. In the same way the paparwork mentions choosing to take as a lump sum under small pots rules. Are you saying I can wihdraw  lump sums from small pots regardless of that? If so why have FAs and Pensionwise commented to me as they have? With regard to MPAA that would depend on my NHS Pension i presume. So will have to speak to my FA again to understand that element of it.

susanna1

Re wehre to find all your hmrc information...you just scroll down after youve cliked onto box  to look at previous income years

susanna1

So in reading through the above comments it would seem that what is being said is that the fact that the paperwork for both the RNPFN and Aviva funds state on payout paperwork that this "is 1 Pot under the pot or 3 rule" that I have only so far had 2 pots. Royal London would certainly be the 3rd pot. This would explain why  Pensionwise were saying its fine. So why would the original FA state it could be an issue if Aviva one had 4 parts. As HMRC has used same emp code and dates for all seperate boxes to show tax paid would also support this ? So ive been going round in circles needlessly? And all Royal London were asking was for clarificatin that  my payments to them been a 4th pot which it obvioulsy was not?

dunstonh

In 2019 i cashed in a small pot lump sump from Aviva (Friends Life Ltd/Friends provident).

This is important.  It is very common for old Friends plans to use multiple policies within the same overall policy number.   You come across these more often than any other provider in my experience.   Some of their plans would also further segment them and have policy segments.  

My financial adviser cant understand why Aviva plan was spit into 4 parts.

If they are an FA, as you suggest, then they are unlikely to have the experience of dealing with other companies due to their restrictions.   An IFA should know through experience (a trainee or a younger one with low experience may not as they were not around in those days or haven't come across them before).

Typically, the first split would be single premiums, regular premiums and protected rights.  So, three bits there (often employer contributions could create a fourth).   Each would have its own sub-policy number under a main policy number.  Sometimes, top ups would go into a further segment.

Further to that you could have policy segments where would could allow partial withdrawals/transfers.

In general, it is the primary policy number that matters.  Not the sub-policy numbers.  e.g.  if your plan has a master policy number Fxxxx/xxxx but then goes on to be made up of 3 parts then that would be one policy.



you have been asked a couple of times now why small pots is an issue for you but have not replied.    Do you need these pensions to be taken under the small pots rule?  i.e. are you still going to be paying in more than £10,000 a year into pensions or is the lifetime allowance(or new rules) an issue for you?  If not, then UFLPS would be fine.   

Small pots and UPLFS give you the same outcome in terms of accessing your money the same way.   However, UFPLS goes towards your lifetime allowance and triggers the MPAA. Whreas small pots do not.

If the LTA or the MPAA are not an issue for you then using the small pots rule is unnecessary and you can use UFPLS as many times as you like.

Marcon

susanna1 said:

Hi Thanks, Ps My writing error re 4 amounts. It was actually Aviva that had 4 amounts, not RNPFN. I am not paying into any other policies and my understanding is that the 3 pots rule applies to  how many pots you are obtaining cash amounts in full from  in small pot lump sums. This is all anyone has ever focused on whom i have spoken with. In the same way the paparwork mentions choosing to take as a lump sum under small pots rules. Are you saying I can wihdraw  lump sums from small pots regardless of that? If so why have FAs and Pensionwise commented to me as they have? With regard to MPAA that would depend on my NHS Pension i presume. So will have to speak to my FA again to understand that element of it.

The 'small pots' regime is only important/relevant to you if you want to avoid triggering the 'Money Purchase Annual Allowance' which would mean you are limited to future tax-relievable annual pension contributions of £10K (or you think the tax free cash you could draw from all your pension arrangements is going to exceed about a quarter of a million pounds, which seems unlikely from what you've posted!).

You can cash in any number of personal pensions, of any value, once you are old enough (currently 55) to do so. No idea why FAs and Pensionwise have said what they have said, but as you seem to have been entirely focussed on small pots, they were presumably responding to you on that basis.

Your NHS pension is a defined benefit scheme and has no impact on the MPAA/doesn't trigger it.

FIREDreamer

Marcon said:

susanna1 said:

Hi Thanks, Ps My writing error re 4 amounts. It was actually Aviva that had 4 amounts, not RNPFN. I am not paying into any other policies and my understanding is that the 3 pots rule applies to  how many pots you are obtaining cash amounts in full from  in small pot lump sums. This is all anyone has ever focused on whom i have spoken with. In the same way the paparwork mentions choosing to take as a lump sum under small pots rules. Are you saying I can wihdraw  lump sums from small pots regardless of that? If so why have FAs and Pensionwise commented to me as they have? With regard to MPAA that would depend on my NHS Pension i presume. So will have to speak to my FA again to understand that element of it.

The 'small pots' regime is only important/relevant to you if you want to avoid triggering the 'Money Purchase Annual Allowance' which would mean you are limited to future tax-relievable annual pension contributions of £10K (or you think the tax free cash you could draw from all your pension arrangements is going to exceed about a quarter of a million pounds, which seems unlikely from what you've posted!).

You can cash in any number of personal pensions, of any value, once you are old enough (currently 55) to do so. No idea why FAs and Pensionwise have said what they have said, but as you seem to have been entirely focussed on small pots, they were presumably responding to you on that basis.

Your NHS pension is a defined benefit scheme and has no impact on the MPAA/doesn't trigger it.

Also useful if you have crystallised the LTA and want to take further tax free cash.