Issues taking a DC small pot pension lump sum.

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  • Brynsam
    Brynsam Posts: 3,643 Forumite
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    dunstonh wrote: »
    Was that £8k gross or £8k net?
    If 8k net then tax relief would take it to £10,000 and returns on the investment (or interest if in cash) would be taking it above £10k. So, small pots rule would not be available to you.

    OP's original post describes it as £10K - hence my post immediately above yours making the same point on 'small pots' (confirmation always welcome!). Sounds as if you have exactly described the issue re SIPP software, which could have been resolved some posts back had the SIPP provider been identified.
  • Joey_Soap
    Joey_Soap Posts: 410 Forumite
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    There was £8k paid into a new SIPP in March which is now £10k. Small pot rules apply. As I say, it is in cash so it is exactly £10k. Also, as I say, it appears to be an internal admin issue at the SIPP provider who has previously confirmed the transaction could take place before the investment in March. I am not naming and shaming just yet, because if the SIPP provider comes good, it will be name and praise. I have only had good experience with these people to date, so it really could be inexperience on the part of the customer service rep. If they fix it promptly I will name and praise here. On the other hand if they try to deny me access to my money and I lodge formal complaint, I will name and shame. It is slightly premature to do so.

    Thank you those who have made a positive contribution, learning from other's experience is what makes the forum worthwhile.

    Cheers.

    Soap.
  • Joey_Soap
    Joey_Soap Posts: 410 Forumite
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    dunstonh wrote: »
    When you say £10k do you mean under 10k or over 10k.

    It has to be £10k or under to use the small pots rule.



    Was that £8k gross or £8k net?
    If 8k net then tax relief would take it to £10,000 and returns on the investment (or interest if in cash) would be taking it above £10k. So, small pots rule would not be available to you.

    Some providers do have the functionality to split a pot in pay it in phases but its not common (ie. 30k could be paid as 3x10k) Its a fluke in their software rather than something they planned and not many do it but it is possible. I assume you researched this before you chose your provider.
    Thanks for the feedback. Yes, we did due diligence on the SIPP provider. I think I have covered the other points elsewhere, but thanks for the info.
  • Joey_Soap
    Joey_Soap Posts: 410 Forumite
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    Linton wrote: »
    Ah thanks, all is now clear. You could always transfer from the SIPP to a restricted Personal Pension, but perhaps its a matter of principle.
    Yes, indeed, that is an option. I'm hoping the present provider can sort out their own internal admin issues that seem to be in the way first. Thanks for the suggestion.

    Soap.
  • Malthusian
    Malthusian Posts: 10,944 Forumite
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    edited 17 May 2018 at 3:00PM
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    Linton wrote: »
    You could always transfer from the SIPP to a restricted Personal Pension, but perhaps its a matter of principle.

    Could be more than principle involved if the SIPP provider applies an exit / transfer charge.

    How the OP asked the question of whether he could take his pension as a small pot depends crucially on how the question was asked. If the question was "can I take the money out" then the SIPP provider would reasonably have interpreted this as meaning "can I take drawdown" and the OP hasn't been misled. If on the other hand the OP asked "can I take the money out using the small pots rule" and the SIPP provider said yes, then they are clearly liable for any costs and the inconvenience involved that arise from going back on this. I.e. the cost of transferring to another provider.

    It would help if he had it in writing, but it's not essential. If he can persuade the FOS that he asked specifically about the small pot rule and was told he could use this, and the provider can't contradict this from their call recordings, then he will get redress one way or the other.
  • Joey_Soap
    Joey_Soap Posts: 410 Forumite
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    Thanks, I can confirm everything was done correctly and the SIPP provider is looking into it. I hope they realise it is an error on the part of the front line customer service rep. If you get a not so experienced one, you get a different answer than you expect. Hoping for a positive outcome at this stage.
  • dunstonh
    dunstonh Posts: 116,387 Forumite
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    Thinking out loud....

    did you specifically say "small pots rule" or did you say triviality or trivial lump sum? Triviality/trivial payments were abolished in 2015. An inexperienced call centre worker may be taking you too literally.

    or

    Could interest be accruing on the value that has yet to be paid and that is taking it above £10k

    (seeing as the service issue is being investigated - just thinking of alternative reasons)
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Joey_Soap
    Joey_Soap Posts: 410 Forumite
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    Thanks, there is definitely no chance of there being more than gbp 10k in the pot.

    You are quite right in your thinking, the change in terminology for DC pension small pots might be an issue to the front line person answering the phone. It won't be everyday they take a call about this.

    The form that you are given to fill in doesn't have a tick box for small pot withdrawal either. That won't help. As I said earlier, this firm has been pretty good in the past. I think they will get over this as an admin issue.

    Hopefully, in a couple of days I will know for sure.

    Thanks for the input.
  • Joey_Soap
    Joey_Soap Posts: 410 Forumite
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    Update is, the SIPP provider tells me they have no way to deliver a small pot withdrawal to me. They have told me (incorrectly) that if I do a Uncrystallised Funds Pension Lump Sum for the £10k then my future SIPP contribution limit of £40k is protected. They are simply wrong. By doing Uncrystallised Funds Pension Lump Sum for the entire DC pot, the Money Purchase Annual Allowance of £4k is triggered****. The only way I can draw the £10k and protect my future SIPP contribution level of £40k per year is by small pot withdrawal.

    I will be speaking to them again tomorrow and if this goes into a formal complaint at that point I will name the SIPP company as a warning to others in the same position.

    **** It is very clear on this web page - https://www.pensionsadvisoryservice.org.uk/about-pensions/pension-reform/freedom-and-choice

    Regards and thanks.

    Soap.
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    Just out of interest, what is your motivation for not naming the provider?
    If you do get it sorted and asa result don't name them, then you are not helping anyone else that hits this issue.
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