Cashing in small pension pots while still wanting to contribute

Wyndham

I'm nearly 55, so can start to access pensions. I have several different ones, including three major DB pensions and a SIPP, all of which I want to keep invested for as long as possible. I'm still contributing to the SIPP, and want to continue to do so.

However, I also have two other DCs, which don't have very much in them.
I have nearly 3000 in a pension with Scottish Widows.
I have just over 700 in NEST.

Neither of these is going to give me much of an income if, for example, I turn them into an annuity! I'm wondering about cashing them in as soon as I can, if only to make my admin easier. But I'm not sure if that is the best action. I have a few questions:

1) If I do take them as cash, can I still contribute to my SIPP in the same tax year? Can I still get tax relief if I do?
2) Is it possible to somehow add them to my SIPP? Would this affect other contributions I could make in the tax year?
3) Would they count under the 'small pots' rule? If so, does anyone have a good link to something that will explain this to me in more detail?
4) Is there anything I should consider which would mean that it's a really bad idea to do this now, rather than later? I realise I may lose potential investment growth, but if I did take the money I would invest it elsewhere.

Just to add, I don't need the money immediately, just want to try to simplify things if I can.

Marcon

Wyndham said:

I'm nearly 55, so can start to access pensions. I have several different ones, including three major DB pensions and a SIPP, all of which I want to keep invested for as long as possible. I'm still contributing to the SIPP, and want to continue to do so.

However, I also have two other DCs, which don't have very much in them.
I have nearly 3000 in a pension with Scottish Widows.
I have just over 700 in NEST.

Neither of these is going to give me much of an income if, for example, I turn them into an annuity! I'm wondering about cashing them in as soon as I can, if only to make my admin easier. But I'm not sure if that is the best action. I have a few questions:

1) If I do take them as cash, can I still contribute to my SIPP in the same tax year? Can I still get tax relief if I do?
2) Is it possible to somehow add them to my SIPP? Would this affect other contributions I could make in the tax year?
3) Would they count under the 'small pots' rule? If so, does anyone have a good link to something that will explain this to me in more detail?
4) Is there anything I should consider which would mean that it's a really bad idea to do this now, rather than later? I realise I may lose potential investment growth, but if I did take the money I would invest it elsewhere.

Just to add, I don't need the money immediately, just want to try to simplify things if I can.

1. Yes and yes (if specifically cashed in as small pots - otherwise you could be limiting future tax relief. See link I've given in 3.)
2. Almost certainly. Have a look at your SIPP provider's website and search for 'transfers in'. No impact on other contributions in the tax year if they are transferred to your SIPP
3. They are eligible to be treated as such. https://www.litrg.org.uk/pensions/pension-withdrawals/small-pensions#4 and look at section headed Small Pots
4. Transferring these to your SIPP would keep all the tax advantages and save messing around with small pot withdrawals.

Cobbler_tone

What the expert said. I had the same and transferred £18k of an old RSA scheme (from way back when I contracted out of SERPS when I was 18) into my current workplaced DC scheme. I only want one DB and one DC to think about in retirement. There were no fees.

Albermarle

I'm nearly 55, so can start to access pensions. I have several different ones, including three major DB pensions and a SIPP, all of which I want to keep invested for as long as possible. I'm still contributing to the SIPP, and want to continue to do so.

To be pedantic, you are not invested in your DB pensions. Presumably what you mean is you do not want to start taking them yet?

Otherwise as above, transfer the two small DC pensions into your SIPP.
You do this via the SIPP provider, and should be no need to contact Nest or SW.

However providers are under obligation to check that any transfer out is not part of some scam. Most use common sense, but you might get asked a lot of questions about where the money is going and how it will be invested. I think Nest can be a bit of a nightmare in this respect but hopefully for just £700 they will behave. 

Wyndham

Albermarle said:

To be pedantic, you are not invested in your DB pensions. Presumably what you mean is you do not want to start taking them yet?

I meant that the funds are currently invested. I mean, they are, aren't they?

But yes, I don't want to start taking them yet as a) I'm still working and b) I don't immediately need the money and c) I'll get a better result if I leave them for longer (hopefully....!)

Dazed_and_C0nfused

Wyndham said:

Albermarle said:

To be pedantic, you are not invested in your DB pensions. Presumably what you mean is you do not want to start taking them yet?

I meant that the funds are currently invested. I mean, they are, aren't they?

But yes, I don't want to start taking them yet as a) I'm still working and b) I don't immediately need the money and c) I'll get a better result if I leave them for longer (hopefully....!)

What a DB pension is invested in is very rarely of any interest to a scheme member.

You are entitled to a pension based on the scheme rules.  So unless something goes drastically wrong (not impossible) the performance is irrelevant.  You will get whatever the scheme rules say even if the underlying funds have performed fantastically well.

With your three DB pensions have you actually checked what happens if you are a deferred member and choose not to take the pension at the schemes NPA? 

Don't just assume payments that you make an active choice not to take will be paid later.  You might miss out on them altogether.  But your scheme rules will determine that.

Wyndham

Dazed_and_C0nfused said:

With your three DB pensions have you actually checked what happens if you are a deferred member and choose not to take the pension at the schemes NPA? 

For the main one (the biggest) I have a lovely spreadsheet where I've cross referenced my retirement age against what I would get at that point (both with and without a lump sum). It is a thing of beauty

It tells me that if I live to my mid-80 - which is, of course, not a given - then I'm best taking it at 63 with a full lump sum. After that, the 'returns' start to dimish when considered over time.

However, it was easy to do for that scheme, and harder for the others. I think when I I'm closer to 60 I will check in with them both and ask for a figure if I were to retire then v the figure for retirement at the NPA. You are right, it's worth considering.

Dazed_and_C0nfused

It tells me that if I live to my mid-80 - which is, of course, not a given - then I'm best taking it at 63 with a full lump sum. After that, the 'returns' start to dimish when considered over time.

What is the NPA for that one?

If it's 60 what happens to the 3 years of payments you are choosing not to take?

Wyndham

Dazed_and_C0nfused said:

It tells me that if I live to my mid-80 - which is, of course, not a given - then I'm best taking it at 63 with a full lump sum. After that, the 'returns' start to dimish when considered over time.

What is the NPA for that one?

If it's 60 what happens to the 3 years of payments you are choosing not to take?

It's not 60. Are there really pensions with an NPA of 60? Still? For this one it is currently 66, but may well be 67 by the time I get there.

Dazed_and_C0nfused

Wyndham said:

Dazed_and_C0nfused said:

It tells me that if I live to my mid-80 - which is, of course, not a given - then I'm best taking it at 63 with a full lump sum. After that, the 'returns' start to dimish when considered over time.

What is the NPA for that one?

If it's 60 what happens to the 3 years of payments you are choosing not to take?

It's not 60. Are there really pensions with an NPA of 60? Still? For this one it is currently 66, but may well be 67 by the time I get there.

NHS 1995, old Teachers pension and civil service Classic all have a NPA of 60.

Cobbler_tone

Mine (DB in private sector) has different normal retirement ages, which I'd imagine is pretty common these days. I had 15 years at NRA of 60 and 11 years at 65, before it finally closing in 2021. I too have a spreadsheet and can model the projection from ages 55-65, supported by the scheme platform. This is combined with different growth of 5% (RPI linked) and 2.5% (RPI linked) respectively. I plan to take mine at 58 (upon retirement) and you can see the point where you would have been overtaken, which is late 70's. If it enables early retirement you have to factor any other pensions and of course the state pension at 67. No point working to 65 (if you don't want to) to suddenly have a significant income you don't need and a hefty tax bill for whatever days you have left. I whack a lot into the DC now as only spend about 50% of my net income.
The reason I haven't took mine already is that it is protected in the pension wrapper and the spousal element continues to grow.