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Taking up to £30,000 using one, or more, ‘small pots’ payment

Under the new pension freedoms effective from 6 April 2015, a simple and convenient way you can take income from part, or all, of your pension is through one, or more, ’small pots’ payment. You must have reached your 55th birthday (or an earlier date if you either have a protected pension age or you are retiring on grounds of ill-health) to receive any small pots payment.

How do small pots payments work?

With the agreement of your pension provider(s), you can cash in up to three arrangements (within one, or more, pension schemeS) and take a maximum of £10,000 from each arrangement, producing a maximum small pots payment of £30,000.

If any of the payment comes from uncrystallised rights, part of the amount (usually 25%) may be tax-free.
The legal structure of different pensions means that the scope to do this may be more limited, as:

  • pension benefits may be held in one, or more, arrangement; and
  • the provider(s) may not allow the merging and/or splitting of pension arrangements.

Note: If you have enhanced protection or any form of fixed protection, you would lose the protection if any existing pension arrangement was split to create any new arrangement(s) in order to facilitate a small pots payment.

My pension savings are in a Collective Retirement Account