MPAA when cashing in a 2nd pension

pastperfect

Hello all,

I plan to retire in the next 2-3 years and have 2 pensions. My current DC pension with work (It's quite big after nearly 20 years of which my company mostly pays into) and also an old DC pension from my previous job (approx 30K). I have work to do on an extension and thought about cashing in the small one. I'm aware of the tax that would be paid if I did it all (their website shows the breakdown). If I do that on the small one, does that cause MPAA to kick in on the work one? What if I just take tax free 25%? Will that also have an impact?

Thanks.

molerat

If you take taxable cash from a DC pension you and / or your employer cannot pay more than £10K pa into any DC pension in future.  If you only take tax free cash then the MPAA is not invoked.

dunstonh

The minute you take 1 penny from the 75% element of the pension, you trigger the MPAA against your NI number.   Its not scheme specific.  Its you.  If you only access that 25% element, you do not trigger the MPAA.

Small pots (under £10k) do not trigger the MPAA as long as taken under the small pots rule.   It is possible to split £30k into three small pots with a small number of providers.

pastperfect

Thanks for the quick replies. So I should be good taking just the tax free 25% lot.

I also spotted in a UK gov webpage (I'm too new to post the link) "You’ll then have 6 months to start taking the remaining 75%, which you’ll usually pay tax on". Is that saying I have 6 months to put the remainder into an annuity or another product? And that MPAA will not kick in on my main pension?

HappyHarry

pastperfect said:

Thanks for the quick replies. So I should be good taking just the tax free 25% lot.

I also spotted in a UK gov webpage (I'm too new to post the link) "You’ll then have 6 months to start taking the remaining 75%, which you’ll usually pay tax on". Is that saying I have 6 months to put the remainder into an annuity or another product? And that MPAA will not kick in on my main pension?

That’s not correct. Once you have taken your 25% tax free cash you can leave the remainder as long as you like - there is no 6 month rule. As said above - soon as you take 1p of taxable income from your pension you will trigger the MPAA which is linked to you - not one or more of your pension pots.

Linton

pastperfect said:

Thanks for the quick replies. So I should be good taking just the tax free 25% lot.

I also spotted in a UK gov webpage (I'm too new to post the link) "You’ll then have 6 months to start taking the remaining 75%, which you’ll usually pay tax on". Is that saying I have 6 months to put the remainder into an annuity or another product? And that MPAA will not kick in on my main pension?

No, I dont know where you saw that, but it's wrong or more likely there is some confusion.  Having taken the 25% you are allowed to take the rest any time you want with tax being deducted. As said before MPAA is only a problem with taking taxable drawdown.

One possible problem is that if your pension acheme is very old it may not support taking the TFLS without putting the rest into an annuity or transferring out.  In that case you should first transfer the pension to a modern scheme like a SIPP which will support drawdown and then take the TFLS.

xylophone

an old DC pension from my previous job (approx 30K).

Consider transfer out and asking the new provider to split as suggested in post above so as to avoid MPAA?

https://forums.moneysavingexpert.com/discussion/comment/80284919/#Comment_80284919

Notepad_Phil

Linton said:

pastperfect said:

Thanks for the quick replies. So I should be good taking just the tax free 25% lot.

I also spotted in a UK gov webpage (I'm too new to post the link) "You’ll then have 6 months to start taking the remaining 75%, which you’ll usually pay tax on". Is that saying I have 6 months to put the remainder into an annuity or another product? And that MPAA will not kick in on my main pension?

No, I dont know where you saw that, but it's wrong or more likely there is some confusion.  ...

I think the OP found the text on https://www.gov.uk/personal-pensions-your-rights/how-you-can-take-pension which certainly talks about a 6 month period after taking the tax free cash in which to start taking the remaining 75%.

Not sure about how to send a message to get the Gov page looked at, but it certainly needs some amendments.

pastperfect

Yes. That is the link I found.

Thanks all for the advice. I feel a lot more educated.

Albermarle

Notepad_Phil said:

Linton said:

pastperfect said:

Thanks for the quick replies. So I should be good taking just the tax free 25% lot.

I also spotted in a UK gov webpage (I'm too new to post the link) "You’ll then have 6 months to start taking the remaining 75%, which you’ll usually pay tax on". Is that saying I have 6 months to put the remainder into an annuity or another product? And that MPAA will not kick in on my main pension?

No, I dont know where you saw that, but it's wrong or more likely there is some confusion.  ...

I think the OP found the text on https://www.gov.uk/personal-pensions-your-rights/how-you-can-take-pension which certainly talks about a 6 month period after taking the tax free cash in which to start taking the remaining 75%.

Not sure about how to send a message to get the Gov page looked at, but it certainly needs some amendments.

The OP is not the first poster to have been misled by this.

Sarahspangles

Notepad_Phil said:

Not sure about how to send a message to get the Gov page looked at, but it certainly needs some amendments.

I’ve used the “Problem” link on the page, I’ve previously reported superseded information on other parts of .gov.uk, and it’s been promptly amended.