small pot advice - via HL

Random47

So have about 3-7 years left to work, depending on how I feel & pension level comfortable with. Still paying into LGPF as a normal member, and SSAVC and APC, though will stop APC soon and move equivalent monthly £ value to SSAVC. 

I have completed a SIPP transfer from VG to HL - value circa £55K. Funds uncrystallised and no payments being made into SIPP at moment, (nor likely to start being made).
I am now looking to access £10K small pot in 2025-26, again in 2026-27 with final 3rd one in 2027-28.
Couple questions:
1. Do I ask HL to create the 3 pots now, or just one from the SIPP each time when I seek it. 
2. Can I access 2 small pots in the same year (tax implications aside). 
3. I am assuming HL pay the tax at source then pay out balance (i.e. £2500 TFLS, then 21% Scottish tax on £7500 (-£1575) = £8425 paid out)
4. Anything I am missing, not thinking through.

Marcon

Random47 said:

So have about 3-7 years left to work, depending on how I feel & pension level comfortable with. Still paying into LGPF as a normal member, and SSAVC and APC, though will stop APC soon and move equivalent monthly £ value to SSAVC. 

I have completed a SIPP transfer from VG to HL - value circa £55K. Funds uncrystallised and no payments being made into SIPP at moment, (nor likely to start being made).
I am now looking to access £10K small pot in 2025-26, again in 2026-27 with final 3rd one in 2027-28.
Couple questions:
1. Do I ask HL to create the 3 pots now, or just one from the SIPP each time when I seek it. 
2. Can I access 2 small pots in the same year (tax implications aside). 
3. I am assuming HL pay the tax at source then pay out balance (i.e. £2500 TFLS, then 21% Scottish tax on £7500 (-£1575) = £8425 paid out)
4. Anything I am missing, not thinking through.

1. No. They might grow to more than £10K before you access them!
2. Yes.
3. Yes.
4. Do you need to make your own life so complicated? It's a serious question, not a provocative one. You're in a DB scheme - are you planning to make future contributions to a DC arrangement of more than £10K a year? Are you in danger of hitting the £268,275 limit on tax free cash? If the answer is 'no' to both of those, why bother with small pots at all?

Random47

Thanks
1. That's what I thought, potential for pot to increase over the £10K, so will ask HL to split of when actually taking.
4. Fair question. Was a bit late in starting pension and I created SIPP 10 years ago to be the 'bridge vehicle' between early DB retirement and SP. I added APC payments few years back, but only realised late last year around benefits of SSAVC in LGPF scheme. Hence now subscribing heavily into SSAVC and will use the £10K small pot to rebalance salary income a little. Plus if I left full SIPP until retirement there is a risk it puts me into higher tax band when taking along with DB. And yes possible max out the limit of tax free should I stay till around 64.

Dazed_and_C0nfused

Marcon said:

Random47 said:

So have about 3-7 years left to work, depending on how I feel & pension level comfortable with. Still paying into LGPF as a normal member, and SSAVC and APC, though will stop APC soon and move equivalent monthly £ value to SSAVC. 

I have completed a SIPP transfer from VG to HL - value circa £55K. Funds uncrystallised and no payments being made into SIPP at moment, (nor likely to start being made).
I am now looking to access £10K small pot in 2025-26, again in 2026-27 with final 3rd one in 2027-28.
Couple questions:
1. Do I ask HL to create the 3 pots now, or just one from the SIPP each time when I seek it. 
2. Can I access 2 small pots in the same year (tax implications aside). 
3. I am assuming HL pay the tax at source then pay out balance (i.e. £2500 TFLS, then 21% Scottish tax on £7500 (-£1575) = £8425 paid out)
4. Anything I am missing, not thinking through.

1. No. They might grow to more than £10K before you access them!
2. Yes.
3. Yes.
4. Do you need to make your own life so complicated? It's a serious question, not a provocative one. You're in a DB scheme - are you planning to make future contributions to a DC arrangement of more than £10K a year? Are you in danger of hitting the £268,275 limit on tax free cash? If the answer is 'no' to both of those, why bother with small pots at all?

I don't think an employer or pension payer is able to assume Scottish rates apply.

Where the payment is relating to a "small pot" they should operate tax code BR.

Obviously they can operate other codes but I think the chances of operating SD0 is highly unlikely.  Small pots is quite a common situation so I would be surprised if any code other than BR was used.

The additional £75 will be sorted between the op and HMRC at some point after the small pot has been paid out.

Random47

Dazed_and_C0nfused said:

The additional £75 will be sorted between the op and HMRC at some point after the small pot has been paid out.

Yeah, still do an annual tax return to keep on top of matters so putting small pot income into following year will sort that one out. 

Any idea how long HL usually take to do small pot payment from application - few weeks, few months?

TcpnT

When I did this a few years back with HL it was very quick. Can't remember exact time but certainly not months. More like a couple of weeks

shortseller09

Did one in mid-March last year and it took three weeks, 'may' have been slowed by tax year-end.

WYSPECIAL

Random47 said:

So have about 3-7 years left to work, depending on how I feel & pension level comfortable with. Still paying into LGPF as a normal member, and SSAVC and APC, though will stop APC soon and move equivalent monthly £ value to SSAVC. 

I have completed a SIPP transfer from VG to HL - value circa £55K. Funds uncrystallised and no payments being made into SIPP at moment, (nor likely to start being made).
I am now looking to access £10K small pot in 2025-26, again in 2026-27 with final 3rd one in 2027-28.
Couple questions:
1. Do I ask HL to create the 3 pots now, or just one from the SIPP each time when I seek it. 
2. Can I access 2 small pots in the same year (tax implications aside). 
3. I am assuming HL pay the tax at source then pay out balance (i.e. £2500 TFLS, then 21% Scottish tax on £7500 (-£1575) = £8425 paid out)
4. Anything I am missing, not thinking through.

Only thing you may be missing, or might want to be aware of, is that when HL report the payment to HMRC they may change your tax code in the belief that you are going to receive an extra £7500 of taxable income every month which then takes a couple of weeks to get corrected. If you are close to a pay day at work it could mean a lot of tax being deducted from that salary payment if your tax code isn't corrected in time.

Happened to me twice when I did small pot withdrawals from HL.

As for timescales, each took a couple of weeks from application to cash landing in bank.

Dazed_and_C0nfused

WYSPECIAL said:

Random47 said:

So have about 3-7 years left to work, depending on how I feel & pension level comfortable with. Still paying into LGPF as a normal member, and SSAVC and APC, though will stop APC soon and move equivalent monthly £ value to SSAVC. 

I have completed a SIPP transfer from VG to HL - value circa £55K. Funds uncrystallised and no payments being made into SIPP at moment, (nor likely to start being made).
I am now looking to access £10K small pot in 2025-26, again in 2026-27 with final 3rd one in 2027-28.
Couple questions:
1. Do I ask HL to create the 3 pots now, or just one from the SIPP each time when I seek it. 
2. Can I access 2 small pots in the same year (tax implications aside). 
3. I am assuming HL pay the tax at source then pay out balance (i.e. £2500 TFLS, then 21% Scottish tax on £7500 (-£1575) = £8425 paid out)
4. Anything I am missing, not thinking through.

Only thing you may be missing, or might want to be aware of, is that when HL report the payment to HMRC they may change your tax code in the belief that you are going to receive an extra £7500 of taxable income every month which then takes a couple of weeks to get corrected. If you are close to a pay day at work it could mean a lot of tax being deducted from that salary payment if your tax code isn't corrected in time.

Happened to me twice when I did small pot withdrawals from HL.

As for timescales, each took a couple of weeks from application to cash landing in bank.

That sounds a little odd.  Did HL definitely report them as "small pots"? 

The very nature of small pots is that pension has ended, so HMRC would know that no more income was expected from that source.

Albermarle

WYSPECIAL said:

Random47 said:

So have about 3-7 years left to work, depending on how I feel & pension level comfortable with. Still paying into LGPF as a normal member, and SSAVC and APC, though will stop APC soon and move equivalent monthly £ value to SSAVC. 

I have completed a SIPP transfer from VG to HL - value circa £55K. Funds uncrystallised and no payments being made into SIPP at moment, (nor likely to start being made).
I am now looking to access £10K small pot in 2025-26, again in 2026-27 with final 3rd one in 2027-28.
Couple questions:
1. Do I ask HL to create the 3 pots now, or just one from the SIPP each time when I seek it. 
2. Can I access 2 small pots in the same year (tax implications aside). 
3. I am assuming HL pay the tax at source then pay out balance (i.e. £2500 TFLS, then 21% Scottish tax on £7500 (-£1575) = £8425 paid out)
4. Anything I am missing, not thinking through.

Only thing you may be missing, or might want to be aware of, is that when HL report the payment to HMRC they may change your tax code in the belief that you are going to receive an extra £7500 of taxable income every month which then takes a couple of weeks to get corrected. If you are close to a pay day at work it could mean a lot of tax being deducted from that salary payment if your tax code isn't corrected in time.

Happened to me twice when I did small pot withdrawals from HL.

As for timescales, each took a couple of weeks from application to cash landing in bank.

I did a HL one last year and it took about two weeks.
Then I had the problem highlighted above. The tax code for my regular pension changed from 1257 to K3500 ( or something like that. As the pension/employment was registered as ended, I could not amend the estimated income.
So a call to HMRC was needed to resolve.
A month later I took a small pot from AJ Bell and this time all went OK with no tax code change.
Why the difference ? No idea 

Dazed_and_C0nfused

Albermarle said:

WYSPECIAL said:

Random47 said:

So have about 3-7 years left to work, depending on how I feel & pension level comfortable with. Still paying into LGPF as a normal member, and SSAVC and APC, though will stop APC soon and move equivalent monthly £ value to SSAVC. 

I have completed a SIPP transfer from VG to HL - value circa £55K. Funds uncrystallised and no payments being made into SIPP at moment, (nor likely to start being made).
I am now looking to access £10K small pot in 2025-26, again in 2026-27 with final 3rd one in 2027-28.
Couple questions:
1. Do I ask HL to create the 3 pots now, or just one from the SIPP each time when I seek it. 
2. Can I access 2 small pots in the same year (tax implications aside). 
3. I am assuming HL pay the tax at source then pay out balance (i.e. £2500 TFLS, then 21% Scottish tax on £7500 (-£1575) = £8425 paid out)
4. Anything I am missing, not thinking through.

Only thing you may be missing, or might want to be aware of, is that when HL report the payment to HMRC they may change your tax code in the belief that you are going to receive an extra £7500 of taxable income every month which then takes a couple of weeks to get corrected. If you are close to a pay day at work it could mean a lot of tax being deducted from that salary payment if your tax code isn't corrected in time.

Happened to me twice when I did small pot withdrawals from HL.

As for timescales, each took a couple of weeks from application to cash landing in bank.

I did a HL one last year and it took about two weeks.
Then I had the problem highlighted above. The tax code for my regular pension changed from 1257 to K3500 ( or something like that. As the pension/employment was registered as ended, I could not amend the estimated income.
So a call to HMRC was needed to resolve.
A month later I took a small pot from AJ Bell and this time all went OK with no tax code change.
Why the difference ? No idea 

Did you look at your Personal Tax Account just after either payment was made?

Maybe HL didn't provide an end date for the pension and AJ Bell did?  If it is a small pot then it must have ended as the pension pot is emptied.

Maybe HL's process for dealing with small pots is different (given they are known to be very relaxed about the rules in the first place!).