Pension Type ?

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My sister has been going on about a Pension she saw that lets you invest a lump sum (£3k say) and the government matches it, then you can"withdraw" your initial lump sum. She saw it somewhere but doesn't know the name of it.

Does anyone know of this ? or has heard of this personal pension before ?.

Any info will help, she's doing my head in trying to find it for her online.

margaretclare

What a lovely idea. You pay in £3000, the government matches this with another £3000, total £6000, you then draw it straight out?? And it's a pension plan, which means you usually can't draw anything out until at least age 50??

Dream on!

Margaret Clare

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margaretclare wrote:

What a lovely idea. You pay in £3000, the government matches this with another £3000, total £6000, you then draw it straight out?? And it's a pension plan, which means you usually can't draw anything out until at least age 50??

Dream on!

Margaret Clare

Yes you can withdraw your initial lump sum invested not the whole amount (including what the government put in).

It was in the Money section of the Mail on Sunday, like most papers it was thrown out and now she wants to know more about it.

margaretclare

Hi

The closest I could get to it was this webchat:

http://www.mailonsunday.co.uk/pages/live/money/money.html?in_page_id=1804

but nowhere could I find exactly what your sister is talking about.

There's a 'Moneybox Live' programme on today, BBC Radio 4:

http://news.bbc.co.uk/1/hi/programmes/moneybox/4857726.stm

That might be a good place to ask.

Margaret Clare

Andy_L

google "immediate vesting pension"

if you're 50+ you pay in a lump sum, get the tax rebate then immediately "vest" (take) the pension.

Andy

margaretclare

Andy_L wrote:

google "immediate vesting pension"

if you're 50+ you pay in a lump sum, get the tax rebate then immediately "vest" (take) the pension.

Yes, but the government doesn't 'match' the payment you make, does it? the government i.e. the taxman gives you back the tax rate you normally pay. In other words if you put in 78p the taxman gives you back 22p, making £1 in all. Multiply by 10, or 100, or whatever you want.

But that wasn't what the OP was saying - he said his sister had seen a scheme whereby the gubmint would 'match' whatever you put in. I took that to mean pound for pound, as in the best occupational pension schemes,where you put in a percentage and employer puts in same percentage.

And can you take the whole of the pension? Isn't it true to say that you can take 25% as a tax-free lump sum but that the remaining 75% has to either provide an annuity (under the old rules) or annual drawdown?

I've been doing this myself - I now have a pot of approx £8200 including the taxman's welcome contributions, but nowhere have I found a way of getting the whole of that £8200 back. I'm taking 25% as a tax-free lump sum and transferring the rest from the stakeholder into a SIPP, but nowhere is it possible for me to take the whole lot back!

Margaret Clare

Andy_L

margaretclare wrote:

But that wasn't what the OP was saying - he said his sister had seen a scheme whereby the gubmint would 'match' whatever you put in. I took that to mean pound for pound, as in the best occupational pension schemes,where you put in a percentage and employer puts in same percentage.

I'm prepared to go out on a limb & say there's I can see no way the treasury would hand out 100% matching payments. I suspect some miscommunication between Mail on Sunday, OP's sister & OP.

margaretclare

Andy_L wrote:

I'm prepared to go out on a limb & say there's I can see no way the treasury would hand out 100% matching payments. I suspect some miscommunication between Mail on Sunday, OP's sister & OP.

That's what I thought, which is why I wrote 'dream on'!

Margaret Clare

claretmatt

The practice is known as recycling

The way it works is you take the tax free cash sum from a Personal Pension, then reinvest it into the pension arrangement to double up on tax relief. This is where you might have got the idea of double your money?

The idea is not new, but the ability to select zero withdrawals under the new regime means that it could be done without any taxable income benefit emerging at the same time

In the HMRC announcement linked to the Pre-Budget Report in December 2005, it was stated that action was being taken to remove tax advantages from this exercise

The announcement says that this will be done through a new anti-avoidance rule targeting ‘cases where lump sums are taken with the sole or main purpose of reinvesting them in a pension scheme to create additional savings through the additional tax relief granted.

So it has therefore been outlawed and anyone caught practicing this would probably lose the exempt status of their pension scheme and lose all the tax privaledges.

However it seems that this will be a very hard area to police, which the revenue have already reluctantly admitted

EdInvestor

Recycling of tax free cash is now allowed for sums below 15k.

whiteflag_3

EdInvestor wrote:

Recycling of tax free cash is now allowed for sums below 15k.

is it , can you post a link to where you read this or how you have come to know this as fact ?