Contribution Limits...

Bob3

Hello All,


Apologies if this has been answered before somewhere....


I am 55 in early Feb & have largish money purchase pension fund from which I may like to take the 25% tax free lump sum. If I take this either before or after 6 April 2015 do I still keep my £40,000 contribution limit as long as I do not drawdown?


Are there any benefits of say taking the Capped drawdown before April (I believe this can retain the £40,000 limit?) & if I take this can it be changed for flexible drawdown at a later date giving me a greater drawdown option??
Thanks in advance.

jamesd

Yes, you keep the £40,000 contribution limit if all you take using flexi-access drawdown from 6 April 2015. Take a penny more and you trigger the drop.

If you start capped drawdown you get to take the 25% tax free lump sum and also take out the GAD limit income each year without triggering the reduction. This is a substantial benefit for many people, particularly as you're allowed to recycle income into more pension contributions if you want to. Go above the GAD limit and you'll trigger the reduction.

You can change from capped drawdown to flexi-access drawdown at a later time if you want to.

Bob3

Thank you Jamesd!

Shedman

JamesD. Apologies for butting in on the thread but just so I am clear if I were to go into capped drawdown this tax year and stick to capped drawdown in 2015-16 and only switched to flexi drawdown in 2016-17 I would keep £40k AA for 15-16 and only drop to £10k in 16-17, but if I switched to flexi drawdown in 15-16 I would immediately drop back to £10k AA from April 6 - am I am understanding that correctly?

Also does the unused AA carry forward from prior years still apply in 15-16 even if I did say drop to the £10k allowance by going straight into flexi drawdown in 15-16

e.g if I had say £20k unused AA in each year for 12-13, 13-14 and 14-15 then I would still have £70k AA in 15-16 ? And likewise if I then didn't use all of the 13-14 & 14-15 AA I could carry that forward until 16-17 and similarly the 14-15 unused amount into 17-18 at which point there would no further carry forward as I understand however that the £10k AA is not capable of being carried forward?

jamesd

Right, assuming you actually took some income when you switched from capped to flexi-access.

Once the drop to 10k is triggered you lose your ability to carry forward unused allowance from past years. No escape there.

You can use things like cheap credit card or other borrowing to defer taking more than the 25% or 25% plus GAD.

Shedman

James

Thanks for response. Quick question...are you an insomniac or just living a life of retired luxury in some far flung exotic location as I notice your posts are normally the early hours of the morning:)

jamesd

I'm from the far-flung world of those who have body clocks that make working evenings and nights best for them.