whether to cash in a small (<£10,000) pension pot

I found the answer: the first 25% is tax free and the rest is taxed as income.

Robert

• while employed and when self employed. One of these (with Phoenix Life)

• has less than £10,000 in it; the others are bigger.

The total of all the pots must be less than £30,000 for this rule to ap ply.

says yes, although you might be able to reclaim some, or all of it if you are currently below the tax threshold. Most of it will be taxed at source, basically as earned income, so you will have to actively reclaim any over-taxation.

Indeed. The remaining (say) £7,500 will be taxed as income. How much tax you actually have to pay on that will depend on what other income you have. If you have some unused allowance, you can offset some of it against that. Otherwise, if you're a standard rate taxpayer, it will be taxed at 20%. However, if the addition of this income pushes you over the standard rate limit, some or all of it may be taxed at 40%.

As others have said, tax at 20% will be deducted by the fund manager, and you will have to sort out any over or under payment with HMRC at the end of the Tax Year.

Ah, you mean the "triviality" criteria. It was not clear to me that you h ad to meet that requirement as well. According to this:

mdetailed%20v1.7.pdf there are two special rules that can be used even if the 'main triviality' criteria have not been met. But it is not completely clear what they mean because they say "even if the main rules above have not been met" but the t ext above is headed "core eligibility rules" not "main rules".

Robert

ou had to meet that requirement as well. According to this:

ty' criteria have not been met. But it is not completely clear what they mean because they say "even if the main rules above have not been met" b ut the text above is headed "core eligibility rules" not "main rules".

Looks like I didn't read it carefully enough. The first bit in the HMRC

document is pot

Actually, this may all become academic, as, as I understand it, the plan is to remove the maximums from next April. You'll still get hit for the tax in the year you take the money.

That's a good point.

I imagine the government are expecting a lot of people to draw their whole fund out and accept the income tax hit. It will add big boost to the treasury.

Robert

Nail --> Head. IMHO it's all about short-term tax gains.

They may not get the tax before the election, though.

Won't stop them spending it to bribe the voters.

i think they might well get a great deal of it almost at once on 6th April 2015. There might be a big pent up demand.

The willingness to take a tax hit is increased by the feeling that the government (of whatever colour) views pension savings as an easy place to raid and that they feel free to change the terms and conditions retrospectively.

Robert