Skip to content
Curtis Banks Curtis Banks
  • About
    • Our People
    • Careers
    • ESG
  • SIPP
  • SSAS
  • Property
    • Property Videos
  • Investments
  • Literature
  • Insights
    • CPD On Demand
    • Adviser Insights
    • Adviser tools
    • Case Studies
    • News
  • Contact
  • Share Price:  267.92 p
  • Investors
  • Contact

Small pot lump sums

Back to Case Studies

Share this article:

Definitions

What is a small pot lump sum?

There are many reasons why a person might end up with one or more small pensions; for example, from a short period of employment. There is a set of provisions, known as the ‘small pot lump sum rules’, which allow individuals to easily access such funds as a lump sum. In these cases, individuals don’t need to go through the possible time and expense of accessing the funds through more traditional means.

What is the lifetime allowance?

The lifetime allowance is the maximum value of pension benefits you can access without incurring a charge. It is a way of limiting the overall value of the pension tax advantages you can benefit from.

What is meant by a ‘payment under a scheme that is not an occupational or public service pension scheme’?

There are several types of small pot lump sums. However, for members of pension schemes such as SIPPs, this is the set of rules which is normally being referred to. For the remainder of this fact sheet, unless otherwise stated, this is the set of rules being described.

Rules

When can a person take a small pot lump sum?

The following conditions need to be met in order for someone to receive a small pot lump sum:

  • The individual must have reached normal minimum pension age (currently 55), have a protected pension age, or meet the ill-health condition
  • The payment cannot exceed £10,000
  • The payment must represent all of the benefits under the pension arrangement (in other words, there will be nothing left for the individual to receive further benefits from)
  • The individual cannot receive more than three payments in total under this set of rules.

How are small pot lump sums taxed?

If the small pot lump sum is being paid from uncrystallised funds (funds from which no benefits, such as tax free cash, have previously been taken), then 25% of the lump sum will be tax free, and 75% is taxed as income at the individual’s marginal rate of income tax.

If the lump sum is being paid from crystallised funds (funds which are available to be paid as taxable income, with tax free cash already having been taken), then the whole amount will be taxed as income.

Are there other differences between small pot lump sums and other pension benefit options?

A small pot lump sum is not tested against the individual’s lifetime allowance.

What other types of small pot lump sum rules are there?

The rules described in this fact sheet relate to a specific set of small pot lump sum rules, for non-occupational and non-public service schemes. There are separate sets of rules for:

  • Occupational and public service schemes
  • Funds left stranded after a transfer to a new pension scheme
  • Funds left stranded after purchasing an annuity or a scheme pension
  • Certain payments under the Financial Services Compensation Scheme (FSCS).

These rules are outside the scope of this fact sheet. You can find more information by searching “small pension payments” (including the quotation marks) on gov.uk. We recommend that you speak to your pension provider and seek financial advice if you think you may be eligible to receive funds using one of these sets of rules.

Case Study

Small pot lump sums

pdf | 108 KB
Download
  • Careers
  • Investors
  • Privacy
  • Modern Slavery Statement
  • Legal
  • Accessibility
Curtis Banks Curtis Banks
  • Curtis Banks Twitter
  • Curtis Banks Linkedin
© 2019 Curtis Banks Group. All rights reserved.
This website is aimed at professional advisers and firms rather than consumers. We do not offer advice on - or judge the suitability of – SIPPs or their investments. If you are a consumer interested in a SIPP you should seek the advice of a financial adviser.
Site by Mr B & Friends

Our secure
portal

Your Future SIPP

Log in

Curtis Banks

Log in

Suffolk Life

Log in
  • Please note: When creating a User ID, please do not use your email address as your User ID as this must be limited to 30 characters maximum.

  • Please note: New registrations for portal access for Advisers will take up to 1 working day to process and you will receive confirmation once your account has been activated. Please do not try and log in before your confirmation is received.

  • Advisers and Clients with previous Suffolk Life portal access should now log in to the Your Future SIPP or Suffolk Life portal. If this is the first time you have logged in to Your Future SIPP portal, simply login with your Suffolk Life details and for security reasons you will be prompted to change your password for future access.

  • Clients with no portal access please contact SIPP Support via phone 01473 296 969 or email sippsupportteam@curtisbanks.co.uk to request an account.

  • Curtis Banks users who have Curtis Banks SIPP or SSAS should continue to log in via the Curtis Banks portal. For any questions regarding Curtis Banks portal access please click here to contact the relevant team.
Tell us what you are
looking for?
    How can i help you today?

    How can I help you today?