Partial TFLS advice. 30 July 2018 at 11:06PM edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning 8 replies 987 views

pensionpawn

Could, if it made financial sense, you take 10% TFLS at 55, another 10% at 56 and the last 5% at 57 and continue to dump £30k pa into your pension (via salary sacrifice) for those three years? Also, if you took 10% of your TFLS does the next 10% apply to the whole pot again, after it has (hopefully) grown for another 12 months, or does the second 10% only come from the 'untouched' portion of the original pot (which may or not have grown)?

Thanks.

Linton

When you take the TFLS you "crystalise" the pot. When you crystalise a pot you take 25% TFLS. So if you take 10% of your total portfolio as TFLS you are effectively creating two separate pots, 40% of the original crystalised and 60% uncrystalised. Extra contributions are added to the uncrystalised portion.

Brynsam

Check if your provider has the necessary systems and software to allow this - older arrangements may not be able to offer this.

For a general explanation of what you can and can't do, see https://www.pensionwise.gov.uk/en/take-cash-in-chunks#continuing-to-pay-in

kidmugsy

pensionpawn wrote: »

Could, if it made financial sense, you take 10% TFLS at 55, another 10% at 56 and the last 5% at 57 and continue to dump £30k pa into your pension (via salary sacrifice) for those three years?

The pension recycling rules are intended to stop - or at least limit - the drawing of TFLS to allow more contributions. You, however, say "continue to dump ...": if that implies that you have been dumping in that sort of amount for a few years that would be interpreted as meaning that the TFLS was not the means of your increasing your usual pension contributions, so you would probably be in the clear.

You might like to google for the rules and search out discussion threads on this forum.

pensionpawn

Surely there is no falling fowl of pension recycling rules if the 25% TFLF is mainly used to repay debt which then frees up income, that was previously being used to service the debt, to replenish the pension fund over the coming years?

Linton

pensionpawn wrote: »

Surely there is no falling fowl of pension recycling rules if the 25% TFLF is mainly used to repay debt which then frees up income, that was previously being used to service the debt, to replenish the pension fund over the coming years?

The pension recycling rules are somewhat vague with a number of criteria which must be met if HMRC are likely to consider pension contributions as recycling. One of the criteria is that you are deliberately using the TFLS to put 30% more money into your pension than you otherwise would have done. However paying off a debt is in itself a reasonable thing to do with the TFLS, many people do this. So I dont believe there is any difficulty there.

kidmugsy

pensionpawn wrote: »

Surely there is no falling foul of pension recycling rules if the 25% TFLF is mainly used to repay debt which then frees up income, that was previously being used to service the debt, to replenish the pension fund over the coming years?

Read the rules rather than assuming that HMRC are mugs. They understand that money is fungible.

I think Linton is being an optimist and HMRC would be within their rights to scorn your argument. On the other hand I'm an optimist too: I still haven't read about anybody being punished under the recycling rules so I don't see why you shouldn't try it on.

pensionpawn

I suppose the best thing to do is write to them shortly before I want to decide the way forward and get the answer in writing!

Dox

pensionpawn wrote: »

I suppose the best thing to do is write to them shortly before I want to decide the way forward and get the answer in writing!

Dream on - do share it if you succeed. It'll be a first! Just be aware that if you do that, you might fall foul of the 'pre-planned' bit of the legislation.