3x small pots

Mozza001

Morning all.

I understand I can take 3 small pots below 10k without triggering drawdown.
Can I take 3 In one calendar year, I understand 75% will be subject to tax?

FIREDreamer

Mozza001 said:

Morning all.

I understand I can take 3 small pots below 10k without triggering drawdown.
Can I take 3 In one calendar year, I understand 75% will be subject to tax?

Yes you can. Max of £7,500 will be tax free and the remaining maximum of £22,500 will have BR tax deducted automatically. The tax will be corrected later if the wrong amount of tax was taken.

saucer

On a slightly more serious note, that would be my understanding. The main benefit of the small pots rule is that it doesn’t trigger the money purchase annual allowance. You need to be very clear with your pension provider that you are wanting to use the ‘small pots’ rule. Not all are so helpful. I don’t actually know whether you would need to somehow separate the 3 pots into 3 sub 10k sums. I’m sure someone else on here will enlighten us. I know HL were clear with me how it is done, but I didn’t do it in the end as it would have been subject to higher rate tax on the 75%

Mark_d

Yes that sounds right.  But remember you do have your personal allowance.

Marcon

Mozza001 said:

Morning all.

I understand I can take 3 small pots below 10k without triggering drawdown.
Can I take 3 In one calendar year, I understand 75% will be subject to tax?

Nothing to do with drawdown! I think you're confusing two issues. Taking up to 3 small pots from personal pensions (no limit on the number you can take from occupational schemes but be aware a 'workplace' pension isn't necessarily the same thing as an occupational scheme) doesn't trigger the Money Purchase Annual Allowance.

The pots need to be entirely separate - you can't have one pot of just under £30K and 'draw' on it 3 times.

If you trigger the MPAA, you are limited to a maximum annual contribution of £10K, including any tax relief on personal contributions + any employer contributions, for each year going forward.

MSE_ForumTeam5

Threads merged

Marcon

saucer said:

On a slightly more serious note, that would be my understanding. The main benefit of the small pots rule is that it doesn’t trigger the money purchase annual allowance. You need to be very clear with your pension provider that you are wanting to use the ‘small pots’ rule. Not all are so helpful. I don’t actually know whether you would need to somehow separate the 3 pots into 3 sub 10k sums. I’m sure someone else on here will enlighten us. I know HL were clear with me how it is done, but I didn’t do it in the end as it would have been subject to higher rate tax on the 75%

Yes, or they aren't small pots.

Albermarle

saucer said:

On a slightly more serious note, that would be my understanding. The main benefit of the small pots rule is that it doesn’t trigger the money purchase annual allowance. You need to be very clear with your pension provider that you are wanting to use the ‘small pots’ rule. Not all are so helpful. I don’t actually know whether you would need to somehow separate the 3 pots into 3 sub 10k sums. I’m sure someone else on here will enlighten us. I know HL were clear with me how it is done, but I didn’t do it in the end as it would have been subject to higher rate tax on the 75%

If you have a financial advisor, I think they have ready access to providers who will split 3 X £10K small pots from a larger pot.
Otherwise only HL offer this facility to the public AFAIK. 
Some providers do not even have the facility to make one withdrawal under the small pot rule, even if you really do just have one pot under £10K.

Mozza001

Thanks all, I will be using Hargreaves, currently going through the hell that is Vanguard to transfer the amount needed.

shortseller09

Also bear in mind that Small Pot payments do not use up the new LSA