If you have £10,000 or less in your pension pot, you may be able to cash in the whole lot from your normal minimum pension age.
The first 25% of cash you take is tax-free (limited to a lifetime maximum of £268,275 unless you hold protection for a higher amount). The remaining amount is taxable, as if it were income, at the highest marginal rate you pay.
- For each occupational pension pot you own (like The People’s Pension), you can cash in the proceeds as a small pot lump sum once you’ve stopped paying in. You can do this once for each pot, and you must take the entire pot at once.
- You can cash in up to 3 personal pension pots during your lifetime.
- Unlike flexible lump sums or flexi-access drawdown, a small pot lump sum won’t reduce your annual allowance (the limit on the amount you can save and receive tax relief on).
- HMRC has complex rules on whether you can or can’t take a small pot lump sum. This can include different criteria for transferring pension schemes, so make sure you get guidance and advice.
- If you’re claiming a small pot lump sum with The People’s Pension, you can start the process over the phone, requesting a printed claim form, or through your Online Account. We’ll then let you know if there’s any reason you can’t go ahead.
More about your different options for taking your pension savings