Pension Question

Old_Slaphead

Hi

My income for ITY 2014/5 will be made up of earned income, cashing a small (under £10k) pension plan and a single payment from a capped drawdown.

Can I pay a contribution to another pension plan in respect of earned income or would it be deemed to be recycling of contributions?

Thanks

atush

it would be recycling if you used the TFLS, not income. You are free to put your earned income into a pension (assuming the rules dont change).

jamesd

Recycling isn't banned, there are just limits within which is is permitted and beyond which the recycled portion above that is treated as an unauthorised payment. Not much chance of what you want to do falling into the restrictions of the rule but you should check to be sure. One easy rule is that lump sum recycling up to 1% of the lifetime allowance (£12,500 for a £1.25 million allowance) is fine. If you happen to go over that one there are a range of other conditions that also have to be met before it would be unauthorised recycling.

Recycling income is permitted regardless so if the money from the capped drawdown is income within the GAD limit that portion would be fine.