TFLS and future contributions

goodadvice12

HI - I am considering taking the 25% tax free lump sum. The remainding 75% is deemed 'paid up' - what exactly does that mean? Also, I understand that I would be limited on the amount of future contributions (10k pa??) - is that a limit into ANY pension or just the one I have taken the 25% tax free element from?
My plan is to take 25% of my smaller pension and then leave the 75% for future use (when my tax rate is less) but I want to continue to contribute to another larger pension I have (different provider).
Is the 10k limit just personal contributions - ie can my employer continue to contribute into my second pension (the one I am not planning to touch)? THANKS

Dox

goodadvice12 wrote: »

HI - I am considering taking the 25% tax free lump sum. The remainding 75% is deemed 'paid up' - what exactly does that mean? It means a pension to which you are no longer contributingAlso, I understand that I would be limited on the amount of future contributions (10k pa??) - is that a limit into ANY pension or just the one I have taken the 25% tax free element from?It's the Money Purchase Pension Allowance, or MPPA, and if it applies you are limited to tax relief on pension contributions of £4K to any defined contribution (aka money purchase) pension arrangement, but ONLY if you have'flexibly' accessed your benefits. Taking the normal 25% tax free lump sum doesn't count as 'flexible access'
My plan is to take 25% of my smaller pension and then leave the 75% for future use (when my tax rate is less) but I want to continue to contribute to another larger pension I have (different provider).
Is the 10k limit just personal contributions - ie can my employer continue to contribute into my second pension (the one I am not planning to touch)? Doesn't matter because you haven't triggered the MPPATHANKS

Useful reading: https://www.moneyadviceservice.org.uk/en/articles/money-purchase-annual-allowance

Paul_Herring

goodadvice12 wrote: »

HI - I am considering taking the 25% tax free lump sum. The remainding 75% is deemed 'paid up' - what exactly does that mean?

It means you can't contribute any more money to [that particular bit of money].

In reality, if you continue contributing to that provider, they internally separate that remainder from any more contributions such that you can take 25% TFLS from future contributions, but can't take any more TFLS from that 75% you've already had.

Also, I understand that I would be limited on the amount of future contributions (10k pa??) - is that a limit into ANY pension or just the one I have taken the 25% tax free element from?

When it applies, it's in total, however for that limit to actually apply you need to start withdrawing from that 75%, which you indicate you don't wish to do yet.

Merely taking *just* the 25% TFLS doesn't bring that limit into play.

My plan is to take 25% of my smaller pension and then leave the 75% for future use (when my tax rate is less) but I want to continue to contribute to another larger pension I have (different provider).
Is the 10k limit just personal contributions - ie can my employer continue to contribute into my second pension (the one I am not planning to touch)? THANKS

The limit you're thinking of is only £4K now, but as long as you don't withdraw a penny of funds that *isn't* the TFLS, it won't apply to you.

Merely taking the TFLS doesn't reduce the limit of what you can contribute from what it was before you take it.

goodadvice12

Thanks for your advice - v useful

gonedownthepub

So on a smiler theme.
I have a SIPP which had £100k in and took the TFLS last month ,£25k.
I may start drawdown early next year but I have another £10k from another DB pension to transfer in.
Will I be able to take another TFLS from this fresh transfer , £2.5k?
Any advantages to transfer in the £10k first ,take another TFLS then start drawdown.
I have spoken to SIPP provider and I am still confused how they differentiate between the 75K and the fresh £10k.
They say they seperate the 2 "pots" but I won't be able to physically see this on my online account.
Any thoughts please.