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No brainer??
Comments
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I think the bottom line is that if you do it blatantly and all in one go then you may well end up in trouble with our friends at HMRC. If you do it with a little more subtlety and patience you should be fine - you just need to make sure the two transactions aren't clearly and obviously linked.
If say the pension pot was £200k and you were planning to retire at 65 then no-one is going to bat an eyelid if you take the £50k lump sum and increase your contributions by £10k pa over the next 5 years. Both are perfectly normal things to do and there is no obvious link between tem. I'd probably fudge it very slightly so if the lump sum was £55,555 I certainly wouldn't contribute an extra £11,111 a year.
It would probably also be an idea not to open a special acount just for the lump sum and then make transfers from that to the new pension as that would more than somewhat smack of deliberate planning!0 -
Of course if you do choose to proceed with your plans and they are in contravention of the HMRC rules, then you also have to make sure that HMRC don't know that you are the author of this thread - so well done for using an alias!
HMRC need to show that the recycling was planned from the outset and this thread would be pretty clear evidence.0 -
Do you have to take the lump sum? Could you not take the whole as income and then pay as much as you can of your earned income into your pension scheme so as to reduce your adjusted net income below the 40% band?0
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Of course if you do choose to proceed with your plans and they are in contravention of the HMRC rules, then you also have to make sure that HMRC don't know that you are the author of this thread - so well done for using an alias!
HMRC need to show that the recycling was planned from the outset and this thread would be pretty clear evidence.
Like to make it clear I do not recommend that the OP do any hiding or dubious acts. However as a while back people here give their opinions and interpretations (as they are entitled to do) but I found some of these to be very different to those of HMRC.
I was 100% open with HMRC and they went out of their way to assure me I could pursue, within the rules, my plans which posters here, not all, assured me I couldn't.
Every case is different of course in the details and amounts but I'd ask :cool:I believe past performance is a good guide to future performance :beer:0 -
Every case is indeed different, but as long as the lump sum concerned is > £12.5k, then the case as presented in the OP's original post pretty clearly meets all of the 6 bullet points for recycling from the HMRC website so I would be surprised if they gave him carte blanche - but stranger things have happened.0
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Why on earth put money back in? My pension has done nothing but lose money year after year on either or both the underlying investments and/or charges and fees. My aim would be to get as much money out as soon as possible and never go near a pension again! If you get 25% cash out tax-free and put it back into a pension, you will then only be able to get out 6.25% cash tax free (i.e. 25% of the 25%); what is the benefit of that??0
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Why on earth put money back in? My pension has done nothing but lose money year after year on either or both the underlying investments and/or charges and fees. My aim would be to get as much money out as soon as possible and never go near a pension again! If you get 25% cash out tax-free and put it back into a pension, you will then only be able to get out 6.25% cash tax free (i.e. 25% of the 25%); what is the benefit of that??
What a really silly attitude!
It would only have "ose money year after year on either or both the underlying investments and/or charges and fees." if it was invested in some really, really silly funds. I suspect you simply haven't understood what you had.
If you take 25% of a pension fund tax free and reinvest it in a pension you get tax relief of 20% or more. If it makes no investment gains at all (unlikely) the 25% tax free will have made 20% profit.
The remainder, which is subject to tax, would normally be subject to the same or less tax than the tax relief (generally people pay less tax in retirement.
Where is the problem?0 -
and never go near a pension again
Or, um, any investment?
Pensions only perform as poorly as the funds in which they're invested. The fact that it is a pension has no bearing on its return. That's unless you are unlucky enough to be with a provider who charges exorbitant fees - in which case just shop around and move the thing.I am a Technical Analyst at a third-party pension administration company. My job is to interpret rules and legislation and provide technical guidance, but I am not a lawyer or a qualified advisor of any kind and anything I say on these boards is my opinion only.0
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