Semi-retirement at 60 and continued pension contribution

pinkforfloyd

I am reasonably aware of the upcoming changes to pension provision from April 2015, however there is one area you can probably help me to fully understand.

I intend to go part time with my current employer form the age of 60.
I intend to take my TFLS and live off that till 65. My question is how much can I continue to contribute to my pension from my part time earnings?. I see figures of £10k max and £40k max but not sure which would apply to my circumstances.

Thanks in advance for any advice!

Your_Hero

pinkforfloyd wrote: »

I am reasonably aware of the upcoming changes to pension provision from April 2015, however there is one area you can probably help me to fully understand.

I intend to go part time with my current employer form the age of 60.
I intend to take my TFLS and live off that till 65. My question is how much can I continue to contribute to my pension from my part time earnings?. I see figures of £10k max and £40k max but not sure which would apply to my circumstances.

Thanks in advance for any advice!

£10k limit will be for DC pensions. The overall cap of £40k (current annual allowance) will be used if you are paying into a DB pension.

kidmugsy

pinkforfloyd wrote: »

My question is how much can I continue to contribute to my pension from my part time earnings?. I see figures of £10k max and £40k max but not sure which would apply to my circumstances.

Frequent commenter jamesd has a cunning plan that will let you avoid the £10k limitation. I suggest you use the search function to find his recent comments.

pinkforfloyd

Thanks both for your help!

zagfles

See https://www.gov.uk/government/consultations/freedom-and-choice-in-pensions

My understanding of that is that if you only take the TFLS you won't be subject to the new £10k annual allowance - but it's not entirely clear, it's badly worded so I may be wrong...

jamesd

Taking the 25% tax free lump sum does not reduce the annual allowance from £40,000 to £10,000. Taking more does unless it's from a defined benefit pension or you have a pot in drawdown already, in which case all pots now or in the future can use the GAD allowance in addition to the 25% without triggering the reduction.

So if you are 55 already or will be before 6 April 2015 put at least some money in one pot into capped income drawdown as soon as you can. Then you can use the GAD limit for all future pots.

For example, put £1,000 of a £1,000,000 pot into drawdown and get a GAD limit calculation of say 7%, also pay in £40,000. You can then at any time put the million, the £40,000 or any part or any future contributions into drawdown and take out the GAD limit amount each year in addition to the 25% lump sum.

Provided you do not exceed the GAD limit you will not trigger the reduction.