"Small Pot" benefits question

jdl920p

A question I have on 'Small Pot" pensions.

I have just handed my notice in at work (3 months notice).  At the same time they have transferred to a new scheme provider.  So if I do nothing, and don't combine the two pensions I will likely end up with a fund at retirement of less than £10k, so a "small pot"

I think there are benefits to this, but want to check I have got this right:
1) If I withdraw the small pot pension in one go, 25% is tax free, and that 25% does not count towards my Lump Sum Allowance (LSA) of £268,275
2) Also, withdrawing the small pot won't trigger my MPAA

Are these assumptions correct?  Any downsides I am missing?

Many thanks

Marcon

jdl920p said:

A question I have on 'Small Pot" pensions.

I have just handed my notice in at work (3 months notice).  At the same time they have transferred to a new scheme provider.  So if I do nothing, and don't combine the two pensions I will likely end up with a fund at retirement of less than £10k, so a "small pot"

I think there are benefits to this, but want to check I have got this right:
1) If I withdraw the small pot pension in one go, 25% is tax free, and that 25% does not count towards my Lump Sum Allowance (LSA) of £268,275
2) Also, withdrawing the small pot won't trigger my MPAA

Are these assumptions correct?  Any downsides I am missing?

Many thanks

Under current legislation those assumptions are correct.

MallyGirl

jdl920p said:

A question I have on 'Small Pot" pensions.

I have just handed my notice in at work (3 months notice).  At the same time they have transferred to a new scheme provider.  So if I do nothing, and don't combine the two pensions I will likely end up with a fund at retirement of less than £10k, so a "small pot"

I think there are benefits to this, but want to check I have got this right:
1) If I withdraw the small pot pension in one go, 25% is tax free, and that 25% does not count towards my Lump Sum Allowance (LSA) of £268,275
2) Also, withdrawing the small pot won't trigger my MPAA

Are these assumptions correct?  Any downsides I am missing?

Many thanks

Correct - be careful to request that it is handled under the small pot rule as it isn't done automatically 

Albermarle

You need to check with the provider they can facilitate a withdrawal under the ‘small pots rule’
Some do not offer this .

jdl920p

Thank you that is helpful.  I didn't realise it had to be requested to be handled under the small pot rule.  I am 52 so it will be a few years before withdrawal, so will have to lodge that somewhere in my brain.  I'll also check with the provider that they can do this

MallyGirl

Albermarle said:

You need to check with the provider they can facilitate a withdrawal under the ‘small pots rule’
Some do not offer this .

Indeed. I transferred a small amount from II to HL for this very reason. LSA is not an issue but I didn't want to burn any bridges by triggering MPAA in case I wasn't enjoying retirement (😆) and this was also an easier sell to OH who is still working 

jdl920p

Thanks @MallyGirl .  From what you are saying if the new scheme doesn't allow it to be treated as a small pot I could open a SIPP and transfer it there? That would be good.

Of course, as @Marcon says it is under current legislation.  There will be at least 5 more budgets before I can access my pension, with the ensuing ongoing press speculation!

There is also the risk that it grows so much that it is no longer a small pot

MallyGirl

jdl920p said:

Thanks @MallyGirl .  From what you are saying if the new scheme doesn't allow it to be treated as a small pot I could open a SIPP and transfer it there? That would be good.

Of course, as @Marcon says it is under current legislation.  There will be at least 5 more budgets before I can access my pension, with the ensuing ongoing press speculation!

There is also the risk that it grows so much that it is no longer a small pot

I went with HL SIPP as they (currently) will spin £10K off from any size of uncrystallised pot and allow drawdown of it under the small pot rules. Can do this up to 3 times.

Marcon

jdl920p said:

Thanks @MallyGirl .  From what you are saying if the new scheme doesn't allow it to be treated as a small pot I could open a SIPP and transfer it there? That would be good.

Of course, as @Marcon says it is under current legislation.  There will be at least 5 more budgets before I can access my pension, with the ensuing ongoing press speculation!

There is also the risk that it grows so much that it is no longer a small pot

Doesn't have to be a SIPP - any personal pension arrangement which permits small pot withdrawals will do the trick.

LHW99

There is also the risk that it grows so much that it is no longer a small pot

Nice problem if it happens!

Albermarle

Marcon said:

jdl920p said:

Thanks @MallyGirl .  From what you are saying if the new scheme doesn't allow it to be treated as a small pot I could open a SIPP and transfer it there? That would be good.

Of course, as @Marcon says it is under current legislation.  There will be at least 5 more budgets before I can access my pension, with the ensuing ongoing press speculation!

There is also the risk that it grows so much that it is no longer a small pot

Doesn't have to be a SIPP - any personal pension arrangement which permits small pot withdrawals will do the trick.

Plus it is not guaranteed that every SIPP provider will do it AFAIK.