Pension Recycling

Martin_Stevens

Hi,

From January I'll be receiving a defined benefit pension from a previous employer.

I will be continuing to work part time, and contributing to my current employer's defined contribution pension from my salary.

I've heard there is something called 'pension recycling'. Does this restrict how much I can contribute to my DC pension?

greenglide

If you use income from a DB pension to help with your living costs while contributing to another DB or DC pension then that is fine, thios is not recycling.

Using a tax free lump sum to do the same can be recycling.

If you had taken a DC scheme under the new rules than could reduce the amount the amount you can pay in by reducing the allowance but DB schemes do not do this.

I am in receipt of a DB pension, am still working and contributing to a different DB scheme as well as a DC scheme. It all works.

Martin_Stevens

Thanks - I should be fine then.

I'm only taking a monthly income from my DB pension - no lump sum.

And my continuing contributions to my DC scheme will just be from my salary - although I'll probably increase my % contribution rate substantially - as I can afford to do this now.

kidmugsy

Martin_Stevens wrote: »

I'm only taking a monthly income from my DB pension - no lump sum.

Then the recycling restrictions don't apply to you, as you say.

How about your annual allowance for pension contributions: if you are drawing a DB pension are you capped at £40k p.a. or £10k p.a? Anyone?

HappyHarry

The £10,000 Money Purchase Annal allowance is only applied when income is taken from drawdown plans. (i.e. using FAD / UFPLS / Short Term annuities)

If the OP is receiving income from a DB scheme this will not affect his £40,000 annual allowance.

Martin_Stevens

Yes my pension income is from a DB scheme, not drawdown. And I'm only looking at paying £20K from salary into my DC scheme next year at the very most.

So still looking good.

Thanks

mania112

Would you be better off by deferring the DB pension until you need it, if possible?