Small Pension Pots

FIREDreamer

Not trying to be controversial, but it seems like other providers suggest it’s possible to take small pots from crystallised pensions, three examples  …

(1) M&G Wealth

(2) AJ Bell



(3) Royal London

Greenwaves

FIREDreamer said:

Not trying to be controversial, but it seems like other providers suggest it’s possible to take small pots from crystallised pensions, three examples  …

(1) M&G Wealth

(2) AJ Bell



(3) Royal London

It's both interesting and confusing. I also spoke to AJ Bell who said it couldn't be done from crystallized funds, it would be income and trigger the MPAA. I might go back to them and ask why their phone advice contradicts their website!  Is that a dig I spy, at pension providers who are happy to split a pension to create three 'artificial' small pots  (AJ Bell won't do that) 😄

Marcon

FIREDreamer said:

Not trying to be controversial, but it seems like other providers suggest it’s possible to take small pots from crystallised pensions, three examples  …

(1) M&G Wealth

(2) AJ Bell



(3) Royal London

Not controversial at all - every day's a school day in pensions! Why not do what Greenwaves has done and contact them direct, asking them to confirm the position, or correct their 'information' IF it's not accurate? 

Looking at this (and I've only had time for a quick glance), I suspect there are some very limited circumstances in which this can be done: https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm063700#xd_co_f=YjMzMTgxZTMtMTY5NC00ZTJiLWJjZTAtNDA0YzlkNmI5Y2Fk~

Notable that none of the IFAs who post on this website have joined this discussion with their views...it would be really helpful if they did. I'm not an IFA and spend virtually all my time in the world of occupational schemes, but hopefully they are much more hands on with small pots.

Greenwaves

The pension advice service inform me (they had to check with their back office), that an uncrystallized pension 10k or less can be taken as a small pot and not trigger the MPAA. However they also said whether your scheme provider will do that as a small pot is another matter. Each scheme provider makes up their rules within the confines of HMRC rules. But most definitely they said HMRC rules allow it. 

This was not their initial advice but I pressed them to look more deeply, quoting HMRC rules and M and G interpretations. They went off to research and check and phoned me back with the above answer.

So it seems you can and you can't dependant on your pension provider.

FIREDreamer

Greenwaves said:

The pension advice service inform me (they had to check with their back office), that an uncrystallized pension 10k or less can be taken as a small pot and not trigger the MPAA. However they also said whether your scheme provider will do that as a small pot is another matter. Each scheme provider makes up their rules within the confines of HMRC rules. But most definitely they said HMRC rules allow it. 

This was not their initial advice but I pressed them to look more deeply, quoting HMRC rules and M and G interpretations. They went off to research and check and phoned me back with the above answer.

So it seems you can and you can't dependant on your pension provider.

What about a crystallised pot of £10k?

Greenwaves

FIREDreamer said:

Greenwaves said:

The pension advice service inform me (they had to check with their back office), that an uncrystallized pension 10k or less can be taken as a small pot and not trigger the MPAA. However they also said whether your scheme provider will do that as a small pot is another matter. Each scheme provider makes up their rules within the confines of HMRC rules. But most definitely they said HMRC rules allow it. 

This was not their initial advice but I pressed them to look more deeply, quoting HMRC rules and M and G interpretations. They went off to research and check and phoned me back with the above answer.

So it seems you can and you can't dependant on your pension provider.

What about a crystallised pot of £10k?

The rule is <= to 10k, therefore a crystallized pot of 10k can be taken as a small pot, but not £10,001.

FIREDreamer

Greenwaves said:

FIREDreamer said:

Greenwaves said:

The pension advice service inform me (they had to check with their back office), that an uncrystallized pension 10k or less can be taken as a small pot and not trigger the MPAA. However they also said whether your scheme provider will do that as a small pot is another matter. Each scheme provider makes up their rules within the confines of HMRC rules. But most definitely they said HMRC rules allow it. 

This was not their initial advice but I pressed them to look more deeply, quoting HMRC rules and M and G interpretations. They went off to research and check and phoned me back with the above answer.

So it seems you can and you can't dependant on your pension provider.

What about a crystallised pot of £10k?

The rule is <= to 10k, therefore a crystallized pot of 10k can be taken as a small pot, but not £10,001.

That’s what I thought originally, thanks.

Greenwaves

FIREDreamer said:

Greenwaves said:

FIREDreamer said:

Greenwaves said:

The pension advice service inform me (they had to check with their back office), that an uncrystallized pension 10k or less can be taken as a small pot and not trigger the MPAA. However they also said whether your scheme provider will do that as a small pot is another matter. Each scheme provider makes up their rules within the confines of HMRC rules. But most definitely they said HMRC rules allow it. 

This was not their initial advice but I pressed them to look more deeply, quoting HMRC rules and M and G interpretations. They went off to research and check and phoned me back with the above answer.

So it seems you can and you can't dependant on your pension provider.

What about a crystallised pot of £10k?

The rule is <= to 10k, therefore a crystallized pot of 10k can be taken as a small pot, but not £10,001.

That’s what I thought originally, thanks.

Yes, but although HMRC allows it good luck finding a pension provider whose scheme implements it for crystallized funds. 

FIREDreamer

Greenwaves said:

FIREDreamer said:

Greenwaves said:

FIREDreamer said:

Greenwaves said:

The pension advice service inform me (they had to check with their back office), that an uncrystallized pension 10k or less can be taken as a small pot and not trigger the MPAA. However they also said whether your scheme provider will do that as a small pot is another matter. Each scheme provider makes up their rules within the confines of HMRC rules. But most definitely they said HMRC rules allow it. 

This was not their initial advice but I pressed them to look more deeply, quoting HMRC rules and M and G interpretations. They went off to research and check and phoned me back with the above answer.

So it seems you can and you can't dependant on your pension provider.

What about a crystallised pot of £10k?

The rule is <= to 10k, therefore a crystallized pot of 10k can be taken as a small pot, but not £10,001.

That’s what I thought originally, thanks.

Yes, but although HMRC allows it good luck finding a pension provider whose scheme implements it for crystallized funds. 

I have taken 2 for £10k each from HL so far from uncrystallised pots. Next tax year I will take my third for about £9k (balance after adding £3,600 gross next April). I have about £11k LSA left to do the £3,600 pa top up to age 75 to get the remaining LSA out.

However any extras going into pension will be taxed at 40% on withdrawal (DB and annuity from now and SP in 7 years will use up all of 0% and 20% band leaving loads in crystallised pot even after taking full 20% band out as drawdown up to SPA) so not sure if this is worth it.

Albermarle

Greenwaves said:

The pension advice service inform me (they had to check with their back office), that an uncrystallized pension 10k or less can be taken as a small pot and not trigger the MPAA. However they also said whether your scheme provider will do that as a small pot is another matter. Each scheme provider makes up their rules within the confines of HMRC rules. But most definitely they said HMRC rules allow it. 

This was not their initial advice but I pressed them to look more deeply, quoting HMRC rules and M and G interpretations. They went off to research and check and phoned me back with the above answer.

So it seems you can and you can't dependant on your pension provider.

It is not really the provider making up their own rules.
some just do not offer it as demand is low and having the process in place is unprofitable.