Recycling of LGPS retirement grant

NobbyNeat

I work in Local Government and have commenced flexible retirement within the last month. My retirement grant was £25,500 and I also cashed in an AVC pot as a lump sum which was worth an additional £3,000. I was thinking about using £10,000 of my total lump sum to fund a new AVC pot. I’m not really sure when I will ultimately retire but would not be within 3 years. Does this plan breach recycling rules?

Linton

The recycling rules just apply to the the Tax Free Lump Sum of a pension which in your case was presumably 25% of £3K=£750. There is a £6K lower limit at which reusing a TFLS could be considered recycling. So it would appear that you are well clear of any danger of recycling.


See:

https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/pension-lump-sum-recycling

Middlestitch

Isn't the retirement grant the same as the tax free lump sum where the LGPS is concerned?

NobbyNeat

Yes, the full £27.5k was tax free

Middlestitch

So it counts for recycling purposes?

NobbyNeat

I guess so which is why in trying to seek clarification.

Brynsam

Linton wrote: »

The recycling rules just apply to the the Tax Free Lump Sum of a pension which in your case was presumably 25% of £3K=£750. There is a £6K lower limit at which reusing a TFLS could be considered recycling. So it would appear that you are well clear of any danger of recycling.

When you include the retirement grant, it is a clear breach of the recycling rules, surely?

OP - if you are planning to use this to fund a new AVC pot, have you checked with the LGPS scheme whether this breaches recycling rules? Or ring TPAS, perhaps - link given above by Linton.

Not sure if this was a money purchase (defined contribution ) AVC and whether what you have done counts as accessing benefits flexibly. If it does, then you are limited to £4,000 a year for future tax-relievable contributions to a money purchase arrangement.