Using personal loan to top up pension

crv1963

Mike564 wrote: »

Thanks for replying. I’ll be getting a lump sum from another pension. Part of this cannot be invested in a separate pension scheme as far as I know?
Mike

There are threads on pension recycling on here somewhere they could be worth a read. Can you take the tax free lump sum before taking an income from that pension? I believe once a DC pension is in payment you are limited to 4k pa contributions to a further DC pension.

Could you borrow the 10k from another source or take a loan out without repayment penalties and then pay it back immediately from your lumpsum when it arrives?

Alexland

Mike564 wrote: »

Thanks for the reply. I wasn’t sure paying into the account was an option once the flexi drawdown was taken?
Mike

Yes once you start taking some of the 75% as income from a Defined Contribution scheme then the MPAA kicks in limiting your further contributions to £4k per tax year. However even this requires supporting earnings so as an unemployed pensioner with no earnings your contribution is limited to £3600 (£2880 + 25%) each tax year.

Alex

Mike564

Mike564 wrote: »

Hello everyone. I have seen similar questions to this but I thought I'd ask for some feedback.
I plan to retire at 55 in May and live off flexi drawdown - carefully remaining below the £11k odd tax threshold (my spouse also has a regular pension income)
I intend to borrow £10k from the bank, over 5 years the total repayment is £10,718.40.
Paying this £10k into my pension I reckon this works out at £12,500 including tax relief. I calculate a clear profit of £1,781.60
Does this make sense to any other people out there?
Thanks in advance

Alexland wrote: »

Yes once you start taking some of the 75% as income from a Defined Contribution scheme then the MPAA kicks in limiting your further contributions to £4k per tax year. However even this requires supporting earnings so as an unemployed pensioner with no earnings your contribution is limited to £3600 (£2880 + 25%) each tax year.

Alex

Having now read the MSE "Guide to taking your pension" booklet it suggests on Page 24 that after any withdrawal is made from my DC pension, only £10,000 a year can still be invested. Could I therefore use £10,000 of the TFLS to open a SIPP with another provider and still get tax relief?

Marcon

Mike564 wrote: »

Having now read the MSE "Guide to taking your pension" booklet it suggests on Page 24 that after any withdrawal is made from my DC pension, only £10,000 a year can still be invested. Could I therefore use £10,000 of the TFLS to open a SIPP with another provider and still get tax relief?

If you draw anything from a DC pension over and above 25% of the fund value (which will be tax free), you are then limited to £4,000 contributions (known as as the MPAA, or Money Purchase Annual Allowance to give it its full title) to any DC arrangement, not £10K.

Alexland

Mike564 wrote: »

Having now read the MSE "Guide to taking your pension" booklet it suggests on Page 24 that after any withdrawal is made from my DC pension, only £10,000 a year can still be invested. Could I therefore use £10,000 of the TFLS to open a SIPP with another provider and still get tax relief?

I think you might have been reading page 24 on the 2017 version which has the MPAA limit at £10k
https://www.moneysavingexpert.com/content/dam/mse/documents/guides/pensionguide-2017_updated.pdf

If you read the 2018 version (confusingly still with 2017 filename) then on page 25 the MPAA limit is now £4k
http://images.moneysavingexpert.com/images/documents/pensionguide-2017_updated.pdf

Information on the change to MPAA below
https://www.gov.uk/government/publications/reducing-the-money-purchase-annual-allowance/reducing-the-money-purchase-annual-allowance

However remember that a contribution of £4k still needs to be supported by relevant earnings during that tax year otherwise the limit is £3,600 (£2,880 + 25%)

Alex