pension recycle clarification

xylophone

http://www.thisismoney.co.uk/money/pensions/article-3256132/How-does-pension-recycling-work-good-tax-trick.html

may be worth a look but it is still a case of "yer recycles yer lump sum and yer takes the (albeit small?) risk........"

[Deleted User]

xylophone,
Thanks again for your input. I have read that the pcls, if from DB scheme, is treated differently with regards SIPP contributions. Maybees aye maybees naw!
I have taken my defined benefit pension as i retire in the same month as payment. It has not been taken for the sole reason of recycle, if it makes a difference.
Bill

bigadaj

rangersfc wrote: »

xylophone,
Thanks again for your input. I have read that the pcls, if from DB scheme, is treated differently with regards SIPP contributions. Maybees aye maybees naw!
I have taken my defined benefit pension as i retire in the same month as payment. It has not been taken for the sole reason of recycle, if it makes a difference.
Bill

You don't seem very confident in doing this yourself, might it be best to approach a financial adviser to set this up?

Saves you hassle and worry and if there were any errors then they would be responsible, but there would obviously be a cost involved.

[Deleted User]

bigadaj,
Whilst planning on doing this myself I have not ruled out using /paying independent help.I have spoken ( and given all the facts)with a local broker only yesterday and surprise surprise , he will have to get back to me.
Thanks, Bill

AnotherJoe

OP my apologies, I didnt appreciate the recycling aspect of this (despite it being in your title !)

It's a grey area. Do you have any other savings ? If so, use those, and then take the TFLS in a different tax year. Indeed even take a loan, possibly via 0% credit cards, and after 18 months or so, pay it off or your savings back with the TFLS.

I'll delete my earlier post.

[Deleted User]

Hi AnotherJoe,
The pension will be payable this month and I retire on the 31st Jan.
thanks Bill

Deneb

rangersfc wrote: »

bigadaj,
Whilst planning on doing this myself I have not ruled out using /paying independent help.I have spoken ( and given all the facts)with a local broker only yesterday and surprise surprise , he will have to get back to me.
Thanks, Bill

I would only add that this can be quite a complex area, but no matter what other conditions of the legislation you might fall foul of, the onus is on HMRC to prove that any recycling was pre-planned.

You seem to have already covered that point for them though!

[Deleted User]

Deneb,
Thanks for input.
BILL

jamesd

What is being considered is entirely fine, no need for concern. The following are the reasons why:

1. Recycling not pre-planned at the relevant time by rangersfc
2. Lump sum is incidental to taking of DB pension at a time not controlled by rangersfc. Timing is either due to closure and/or reaching the normal retirement age for the scheme
3. The cumulative basis calculations for recycling of lump sums

The cumulative basis compares expected pension contributions without the lump sum to those with it over a five year period, the two tax years before taking it, the tax year of taking it and the following two tax years. With no contributions anticipated in the next two years it is highly improbable that there will be any increase in contributions, let alone a total increase of more than 30% of the value of the lump sum taken.

The recycling may not even be more than 30% of the lump sum ignoring the cumulative basis, so again would be within the limits.

You won't get advice from the platforms because that would be personal advice and the platforms are for unadvised investing. No reason for the to take the risk of giving you advice they aren't authorised to give you.

So there will be recycling but not recycling in excess of the limits.

jamesd

xylophone wrote: »

A PCLS is a PCLS whatever kind of scheme it comes from?

While a PCLS is always a PCLS not all tax free sums are a PCLS.

The 25% tax free portion of a UFPLS is not a PCLS so can potentially be of value in this sort of planning.

Not relevant to the DB case here but worth knowing.