Small Pot Pensions

[Kateykrunch]

Okay, so you are allowed to take 3 x small pots if value is less than £10,000 each.

What I want to know is:

1). What is the benefit of this, wouldn't it just be exactly the same as any other pension withdrawal (25% tax free and remainder taxed at your usual rate).

2). Can you only take 3 x small pots if your TOTAL pension scheme totals less than the £30,000 maximum. If say you had, £49,000 split between 5 pension schemes, would you need to ignore the SMALL POT thing and just go for normal withdrawl, which I have hinted at, APPEARS TO BE NO DIFFERENT OTHER THAN CALLED SOMETHING ELSE!

3). Under the new rules for taking lump sums, why are they called different things when ultimately they will all bring a 25% tax free and 75% taxed lump of money.

Anyone shed a litttle light onto this at all??

[Mikes10]

You really need to speak to a pensions advisor, in the meantime here is a link to the pensions advisory service:

 

http://www.pensionsadvisoryservice.org.uk/about-pensions/retirement-choices/the-right-choice-for-me/taking-a-small-pension-as-a-cash-lump-sum

[Anna B]

Okay, so you are allowed to take 3 x small pots if value is less than £10,000 each.

What I want to know is:

1). What is the benefit of this, wouldn't it just be exactly the same as any other pension withdrawal (25% tax free and remainder taxed at your usual rate).

2). Can you only take 3 x small pots if your TOTAL pension scheme totals less than the £30,000 maximum. If say you had, £49,000 split between 5 pension schemes, would you need to ignore the SMALL POT thing and just go for normal withdrawl, which I have hinted at, APPEARS TO BE NO DIFFERENT OTHER THAN CALLED SOMETHING ELSE!

3). Under the new rules for taking lump sums, why are they called different things when ultimately they will all bring a 25% tax free and 75% taxed lump of money.

Anyone shed a litttle light onto this at all??

 

I find the whole thing very confusing too. I sometimes think it's been deliberately designed that way.

Read as much as you can (various websites give information as well as pension's advisory service, and there's quite a lot in the financial pages of the newspapers, ) but I probably have to agree with Mikes10 and say get an advisor.

[tlangdon12]

1) There is no benefit to now with DC pots. Effectively the small pots rules allowed UFPLS for pots up to £10k for DC pensions before UFPLS was allowed on your entire pension.

2) So, yes, if you have five small pots in DC schemes you can take the entire value out as UFPLSs and have 25% tax free and pay tax on the rest at your marginal rate.

3) UFPLSs aren't possible with DB schemes so the small pots rule has to exist to allow small DB pots to be taken as a cash lump sum. The tax treatment is the same as for UFPLSs.