Can I take a small pension pot as a lump sum when I transfer or consolidate to Retiready?
Updated 23 March 2018
If you have pension benefits 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 income before age 55 if you have a protected low pension age or meet the ill-health conditions.
• your pension arrangement must be worth no more than £10,000
• you can only exercise this option three times in your lifetime.
If benefits are not in payment, you should have the option to take 25% of the pension value as a tax-free cash sum. 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.
Be aware that taking small pot lump sums may mean that you may run out of cash so make sure that you invest wisely or budget effectively to avoid this.
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, because we will not split it into two arrangements for you.
You may be able to take small pots lump sum from age 55 or earlier 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 HMRC practice, which may change.
Transferring or investing your pension may not be the best option for you, you should compare the benefits from your current pension with the estimated benefits of your new pension, including any guarantees and penalties. If you're unsure whether this is right for you or need advice, please speak to a financial adviser.