small pot pensions v flexi drawdown
Posted: July 20th, 2021, 8:44 pm
My partner, over 55, has one small pot pension of currently £9.3K. I am struggling to see the benefits of taking it as
a small pot pension
v
transferring it to a SIPP and beginning flexi drawdown.
As far as I can see the only benefit of the small pot is that MPAA is not trigged. Apart from that both options would allow 25 % to be taken tax free.
The advantage of the SIPP option is that she could tailor her flexi drawdown to stay below the current £12,570 tax allowance and so not pay tax at all. With the small pot option she has to take the whole £9.3K in one tax year and, because of her likely £8K earnings this tax year, she would end up paying tax on much of the £9.3K pension sum, albeit less the 25% tax free.
Am I missing some other advantage of small pot pensions? It doesn't seem to be the boon I initially thought it might be.
I don't see leaving the pension where it is as a sensible option due to the usual rip off charging and poor performance.
a small pot pension
v
transferring it to a SIPP and beginning flexi drawdown.
As far as I can see the only benefit of the small pot is that MPAA is not trigged. Apart from that both options would allow 25 % to be taken tax free.
The advantage of the SIPP option is that she could tailor her flexi drawdown to stay below the current £12,570 tax allowance and so not pay tax at all. With the small pot option she has to take the whole £9.3K in one tax year and, because of her likely £8K earnings this tax year, she would end up paying tax on much of the £9.3K pension sum, albeit less the 25% tax free.
Am I missing some other advantage of small pot pensions? It doesn't seem to be the boon I initially thought it might be.
I don't see leaving the pension where it is as a sensible option due to the usual rip off charging and poor performance.