Small Pot Question. Complete Pension Idiot.

pfpf

i realise pensions can be a minefield but i am hoping i am a "simple case". the first i looked at my pension situation was in the last couple of weeks.

maxed state pension.

i have 2 private pensions but both are tiny and not contributed to in decades. i am 55+

i think i will be back with questions regarding one that seems to have a rather worrying issue, its one that had a spell in the "opted out" era but i'm researching that one further first.

ok, todays question.

age 55+. pension pot £6700.00 total. is that literally what would come my way?

is my basic understanding correct?

if i cash in i get £1675.00. the other £5025.00 is taxed at 20% so i get a further £4020.00 and HMRC is sent £1005.00 by the pension provider?

i am registered self employed and only post returns of 2k - 3k per year so pay no tax, will i simply ask HMRC to return the £1005.00?

thank you for any replies and forgive my ignorance of what should have been a priority.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6655431/small-pot-question-complete-pension-idiot

If it is taken under under the "small pots" rules (a specific thing, not just a pension that happens to be small) then the tax deducted would be as you described.

But you wouldn't ask HMRC to return the tax deducted. You would just include the taxable pension income, and tax deducted, on your Self Assesment return and that would be reflected on your Self Assessment calculation.

If you are overpaid you can claim that refund, in just the same way you would any other Self Assessment refund.

pfpf

thank you.

""small pots" rules (a specific thing, not just a pension that happens to be small)" oh, i need to re-read.

so if this all happened after April 5th 2026 i would have to wait until my tax return posted in April 27 for any refund?

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81885517#Comment_81885517

I'm not sure what the current rules are to be honest so you might be able to make a claim in advance of filing your tax return (Google forms P50Z and P55).

But if you can do that you need to remember to still include the income and tax deducted on your return and details of any tax already refunded by HMRC.

If you don't go down the small pots route, where tax code BR is used, but still take it all in one go then the emergency tax code (1257L) will be used so the tax deducted will likely be a little bit less than £1,005.

LHW99

https://forums.moneysavingexpert.com/discussion/comment/81885532#Comment_81885532

And if you don't use the small pots rules, my understanding is you trigger the MPAA. Small pot rules don't.

That restricts future pension contributions to £10k pa (which may not worry you, but could have an effect if you had a much increased SE profit one year and wanted to make a bigger contribution).

Brie

when you say private pensions do you mean ones where you personally paid money into a pension firm? or are you referring to ones that aren't state pension but were paid into a work scheme by an employer in the distant past? If it's the second then how they are paid out may depend on what type of scheme the employer had, defined benefit or defined contribution.

pfpf

Brie. personal, not via work.

dazed. thank you. i had assumed as it was under 10k it was simply called small pot. i now see i can withdraw outside of small pot rules.

i'll contact the provider for options/figures.

thanks all.

Marcon

https://forums.moneysavingexpert.com/discussion/comment/81885689#Comment_81885689

There's a good clear explanation here: https://www.litrg.org.uk/pensions/pension-withdrawals/small-pensions

i have 2 private pensions but both are tiny and not contributed to in decades. i am 55+

i think i will be back with questions regarding one that seems to have a rather worrying issue, its one that had a spell in the "opted out" era but i'm researching that one further first.

'Opted out' or 'contracted out'? The former means you chose (or were coerced/advised) to leave a scheme; the latter means you were building up benefits in respect of the basic state pension, but not the additional state pension (SERPS/State Second Pension).

You say you have maximum state pension - are you sure you've already built up that entitlement (your may need more or fewer years than the oft-reported 35 years), or does the forecast indicate it would only apply if you pay another xxx years of NI contributions?

pfpf

Marcon. i didn't want to complicate the matter with details so said "full", once i file in April i will have 30 and will need 5 more, there is a note in my account stating my time "opted out". thank you for pointing that out as a helpful reminder.

off to read the link :)

Yorkie1

https://forums.moneysavingexpert.com/discussion/comment/81885817#Comment_81885817

When you say you will need 5 more years, is that what your actual forecast says, or are you assuming that 35 years will be what you need?

DRS1

OP I may be making some unfounded assumptions but if you are on any sort of means tested benefits you should probably look at whether taking money out of the pension is a good idea.