Can I take a small pension pot as a lump sum when I transfer or consolidate to Retiready?
Updated 18 March 2020
If you have a small pension pot under a personal pension plan (like your existing Aegon pension or a Retiready Pension) and meet certain conditions, you’re able to take the pension fund as a lump sum. Normally 25% of this can be tax free. The main conditions are:
- you must be at least 55 years old. You may be able to take a lump sum before age 55 if you have a protected low pension age or meet the ill-health condition.
- the full value of your pension arrangement must be taken and this must be worth no more than £10,000.
- you can only exercise the small pot lump sum option three times in your lifetime.
If benefits under your plan are not already in payment, 25% of the small lump sum is paid tax-free. 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.
If benefits are in payment, the lump sum value of your pension will be added to the rest of your taxable income in the tax-year in which you take it when determining any income tax liability.
A Retiready Pension can have only one arrangement. If your Retiready Pension was worth more than £10,000, you wouldn’t be able to use the small pots option to take the benefits as a lump sum.
You may be able to take a small pots lump sum before age 55 if you have a protected low pension age or meet the ill-health condition. Find out more at Your Retirement Planner.
This information is based on our understanding of current taxation law and HM Revenue & Customs practice which may change.
You should be comfortable with the investment choices that you make as you may lose features, protections, guarantees or other benefits when you transfer. If you’re not sure about this, or if taking a small pot as a lump sum is right for you, you should get financial advice - there may be a charge for this.
A transfer for consolidation purposes is from one capital at risk pension product to another – so the value of your investments after any consolidation can still fall as well as rise and the final value of your consolidated pension pots may be less than paid in.
Any new funds you move your money into will have their own set of risks that will be detailed in the fund information that will be available to you.