Taking further PCLS from a SIPP

wtiasa1997

In 2022 I crystallised my SIPP for the first time by taking a PCLS of approximately £265,000. At the time it used up 99% of my LTA. I now have two pots within my SIPP - a large crystallised pot from which I drawdown a monthly income and a much smaller uncrystallised pot. The value of the uncrystallised pot is roughly £19,000.

Now that the LTA has been abolished, can I still take an element of the uncrystallised pot as a PCLS & if so how much of it can I take without triggering any tax charges?

If I can only crystallise a certain amount of it tax free then what are the tax implications of then crystallising the remaining pot above any tax free element at a later date?

NoMore

The LTA was replaced by the LSA (Lump sum allowance) which was set at £268275, essentially the same amount of tax free cash you could get under the LTA.

If you have taken no other tax free cash from this or other pensions, and did not have any form of tax free protection, then you have £3275 left of tax free cash you can get out of your uncrystallised proportion.

Only crystallising what you need to achieve this, might be a good idea as you never know the LSA might increase in the future (personally I doubt it, future governments are just going to let fiscal drag reduce it in real terms)

zagfles

You could crystallise around £10-12k or so, whatever uses up the exact remaining LSA, then take the rest of the uncrystallised pot under the "small pots" rule as it'll be under £10k, if the SIPP provider allows it, otherwise you could transfer to HL who do allow it.

mrklaw

curious (will never happen to me) - if you crystallise enough for that last few thousand of your LSA and you still have uncrystallised funds after that - how does the pension provider know that it will all be taxable from that point? and will it move that effectively to crystallised without releasing TFC?

kermchem

https://forums.moneysavingexpert.com/discussion/comment/82126007#Comment_82126007

My experience is that when crystallising part of a SIPP the provider asked me to complete a form which asks how much tax free cash has already been taken from other pensions. Each lump sum taken so far has come with some documentation.

Shadyocuk

https://forums.moneysavingexpert.com/discussion/comment/82125883#Comment_82125883

Dont small pots have to be taken BEFORE any other pots to utalise the small pots rules??

zagfles

https://forums.moneysavingexpert.com/discussion/comment/82126036#Comment_82126036

What makes you think that?

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82125883#Comment_82125883

A couple of thoughts on this.

If your uncrystallised pot is in your SIPP along with the crystallised pot you need to split the uncrystallised pot off into a separate pension. HL allow you to hive off £10k from a larger pension so you can use the small pots rule - others may not be so helpful.

If your provider is one of those which do a notional split between crystallised and uncrystallised then I am not sure if you could hive off just the uncrystallised pot. Maybe you would need to transfer the whole lot to somewhere like HL which has a hard split between crystallised and uncrystallised.

You may have to make sure the provider knows you want to use the small pot rule - not everyone allows you to do it and even if they do they may not understand that is what you are trying to do unless you make it very very clear to them.

You can have a maximum of 3 small pots so if the rump of your uncrystallised pot grows to nearer £30k that may help.

mrklaw

so small pots don’t count towards LSA? effectively allowing a potential maximum tax free cash of an extra £7,500?

DavidT67

https://forums.moneysavingexpert.com/discussion/comment/82126630#Comment_82126630

Yes, that's correct.

DavidT67

https://forums.moneysavingexpert.com/discussion/comment/82126007#Comment_82126007

Once you have consumed your LSA you move assets from uncrystallised to crystallied pots without taking any TFC. My DC pension provider asked me to list out all prior taking of PCLS or TFC and crystallisations from all sources to confirm that no LSA remained. After that I now routinely move new contributions from the uncrystallised pot to the crystallised pot once a quarter.