Small pot lump sums | Help and support

I’ve transferred a pension pot into your scheme, does a certain amount of time need to pass before I can take a small pot lump sum?

archie.homer — Fri, 02 Dec 2016 15:01:05 +0000

If the transfer was over 5 years ago, we can pay the lump sum. If the transfer to us was in the last 5 years, we apply HM Revenue & Custom’s ‘all schemes provisions’ rules, which allow a small pot lump sum to be paid if the total value of your entitlement under the scheme and any related scheme (a registered pension scheme that is an occupational pension scheme relating to the same employment) doesn’t exceed £10,000. If you don’t have any other pension schemes with your employer, a small pot lump sum can be paid if it’s under £10,000.

Can I access my pension pot tax free if I’m a non-taxpayer?

archie.homer — Fri, 02 Dec 2016 15:01:05 +0000

You have the option to take usually 25% of the pension pot as tax-free cash. The remainder is added to the rest of your taxable income in the tax year in which you take it when determining any income tax liability. We deduct tax at basic rate and if there is an overpayment in tax, you can claim this back from HM Revenue & Customs.

I’ve confirmed on your claim form that I’m a controlling director of an employer using The People’s Pension, or connected to such a person. Can I claim a small cash lump sum?

archie.homer — Fri, 02 Dec 2016 15:01:04 +0000

Anyone who is a controlling director of an employer using The People’s Pension, or connected to a controlling director (such as a family member) can’t take a small pot lump sum of £10,000 or less. HM Revenue & Customs state that the member must be at ‘arm’s length’ from any sponsoring employer of the scheme paying the small lump sum.

Members who fall under this bracket can however continue to leave their savings with The People’s Pension or transfer out. They should check before doing so whether they’ll be able to take their small pot lump sum from the receiving scheme after they transfer.

You can also speak to a Financial Conduct Authority-regulated adviser to get advice based on your personal circumstances. If you don’t already have an adviser, you can find one on the Unbiased website. Please note an adviser may charge for their advice. You can also speak to MoneyHelper, who provide free and impartial guidance.

If you’d like to find out more about this and other information about small pot claims, please visit HM Revenue & Customs dedicated lump sums and small pensions payments manual.

I’ve only got £200 in my pension pot – how do I cash it in?

archie.homer — Fri, 02 Dec 2016 15:01:04 +0000

If you’re over your normal minimum pension age, and have £10,000 or less saved in your pension pot when you choose to access it, you may be able to take it as a ‘small pot lump sum’.

Before you’re able to take your money, all contributions into your pension pot must have stopped. Find out more if you think contributions are still being paid by your employer

Find out more about taking your pot all in one go as a small pot lump sum

When you’ve decided how you want to take your savings and you’re ready, find out how to take your pension money.

My employer has gone into administration, can I take a small pot lump sum?

archie.homer — Fri, 02 Dec 2016 15:01:04 +0000

Under HM Revenue & Customs (HMRC) rules, no benefits can remain in an occupational pension scheme (such as The People’s Pension) after a small pot lump sum has been taken. So, before you can take your pension money, we must receive all contributions that are due (when your employer has gone into administration there are often further contributions due).

This matter will become the responsibility of the Insolvency Practitioner, who is responsible for gathering all the information on the pension payments that should have been made before the administration/insolvency date. This information then forms the basis of a claim to the Redundancy Payments Office (RPO), which is part of the Government’s Insolvency Service. Assuming the claim for missed pension payments is agreed and paid by the RPO, the payments would then be sent to us.

However, this process can take a considerable time to complete. Whilst we appreciate this will delay you, under HMRC rules we can’t pay your small pot lump sum until all outstanding contributions are received.

When there are no longer any outstanding contributions, you’ll be able to request to take your money through your account online. If the contributions are still pending, you’ll see a message when you try to take your money online.

When you’re ready, find out how to take your pension money online

I was going to claim a small pot lump sum but the fund value has just gone over £10,000. What can I do?

archie.homer — Fri, 02 Dec 2016 15:01:02 +0000

Under the rules, a small pot lump sum must be £10,000 or less. If it’s over £10,000, you could take a flexible lump sum (HM Revenue & Customs refer to this as an uncrystallised funds pension lump sum or UFPLS). The UFPLS claim pack will make you aware of the difference between this and a small pot lump sum eg a UFPLS will reduce the amount you can pay into your pension each year to £10,000 (known as the money purchase annual allowance), whilst taking a small pot lump sum will maintain your £60,000 annual allowance.

Remember that if you take a UFPLS:

You need to have a minimum pension pot of £10,000 when you take your first lump sum (or £2,000 if you’ve already taken money before)
each lump sum you take must be a minimum of £2,000 (or the rest of your savings in your pension pot if lower)

Find out more about taking your pension pot all in one go through a small pot lump sum or UFPLS

What’s a small pot lump sum and how many of them can I take?

archie.homer — Fri, 02 Dec 2016 15:01:01 +0000

If you have £10,000 or less in your pension pot and you want to take it all in one go – you may be able to take it as a ‘small pot lump sum’ – as long as you meet all of HM Revenue & Customs’ (HMRC’s) rules about when a small pot lump sum can be taken. There are different rules depending on what type of pension you have:

For each occupational pension pot you own (like The People’s Pension), you can take the proceeds as a small pot lump sum once you’ve stopped paying in. You can do this once for each pot.
For personal pension pots, you’re limited to taking a maximum of 3 pots as small pot lump sums in your lifetime.

Find out more about taking your pot all in one go

How do I take my pension savings as a small pot lump sum?

archie.homer — Fri, 02 Dec 2016 15:01:01 +0000

Don’t forget, hasty decisions about your pension savings could have an impact on your future. If you’re looking for advice, Pension Wise offer free impartial guidance online, over the phone or face-to-face.

If you’re experiencing financial difficulties, it’s worth exploring any other savings you might have before taking your pension savings and looking at what other sources of support are in place. More information can be found on the MoneyHelper website.

If you’re over your normal minimum pension age, and have £10,000 or less saved in your pension pot when you choose to access it, you may be able to take it as a ‘small pot lump sum’.

Before you’re able to take your money, all contributions into your pension pot must have stopped. You’ll need to let your employer know you’d like to leave the pension scheme before you start taking your pension. Find out more if you think contributions are still being paid by your employer

Find out more about taking your pot all in one go as a small pot lump sum

When you’ve decided how you want to take your savings and you’re ready, find out how to take your pension money.