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Pension recycling query
Bemma
Posts: 83 Forumite
Is this breaking the pension recycling rules...
I recently read a thread, where someone was going to use their savings for general living expenses so that they could maximise their salary sacrifice contributions.
I'm considering something similar… I'm 49 so this is all a few years away, but want to check the rules around pension recycling.
From 2 tax years before I'm 55, I'm considering increasing my pension contributions through salary sacrifice and supplementing my living expenses from my savings. I plan to continue to do this until I have enough in my pension pot to retire, hopefully when I'm 60.
The amount of savings I will have available at age 52, will depend on various things like salary income and bonuses, stocks and shares ISA performance and how much I can save before then etc.
Two tax years before I'm 55 and onwards, I might increase my salary sacrifice £30k per year gross, so from when I'm 52 - 60. This is a significant increase from my current contribution.
The two tax years before is the pertinent point, as I have read that if I take a tax free lump sum at age 55, and continue my £30k per year contributions, I will not be breaking the recycling rules because I have not increased my contributions significantly. I believe the contributions are compared against contributions for the tax year the tfls was taken, the two previous tax years and the two successive tax years (a 5 year window, my contributions will be static during this period and beyond).
I'm not allowed to post a link! But I found reference material with google searching for "Royal London pension recycling"
Scenarios:
1. If I have enough non pension savings to fund this and don't take a tfls.
2. If fund performance is good enough and I can retire earlier than expected and before my non pension savings run out.
3. I take a tfls at 55, but do not increase my pension contributions - they remain at £30k per year.
a. If I have enough in non pension savings to fund this without the tfls.
b. If I don't enough non pension savings without 'recycling' my tfls.
Scenarios 1 and 2 and obviously the most desirable. Scenario 3… does this break the recycling rules? Specifically if savings/investment performance are poor and I have to continue working until I'm 60+ or using option 3b?
I hope this is clear, but if you can offer advice and need further details, please let me know.
Thanks in advance for any assistance.
Bemma
I recently read a thread, where someone was going to use their savings for general living expenses so that they could maximise their salary sacrifice contributions.
I'm considering something similar… I'm 49 so this is all a few years away, but want to check the rules around pension recycling.
From 2 tax years before I'm 55, I'm considering increasing my pension contributions through salary sacrifice and supplementing my living expenses from my savings. I plan to continue to do this until I have enough in my pension pot to retire, hopefully when I'm 60.
The amount of savings I will have available at age 52, will depend on various things like salary income and bonuses, stocks and shares ISA performance and how much I can save before then etc.
Two tax years before I'm 55 and onwards, I might increase my salary sacrifice £30k per year gross, so from when I'm 52 - 60. This is a significant increase from my current contribution.
The two tax years before is the pertinent point, as I have read that if I take a tax free lump sum at age 55, and continue my £30k per year contributions, I will not be breaking the recycling rules because I have not increased my contributions significantly. I believe the contributions are compared against contributions for the tax year the tfls was taken, the two previous tax years and the two successive tax years (a 5 year window, my contributions will be static during this period and beyond).
I'm not allowed to post a link! But I found reference material with google searching for "Royal London pension recycling"
Scenarios:
1. If I have enough non pension savings to fund this and don't take a tfls.
2. If fund performance is good enough and I can retire earlier than expected and before my non pension savings run out.
3. I take a tfls at 55, but do not increase my pension contributions - they remain at £30k per year.
a. If I have enough in non pension savings to fund this without the tfls.
b. If I don't enough non pension savings without 'recycling' my tfls.
Scenarios 1 and 2 and obviously the most desirable. Scenario 3… does this break the recycling rules? Specifically if savings/investment performance are poor and I have to continue working until I'm 60+ or using option 3b?
I hope this is clear, but if you can offer advice and need further details, please let me know.
Thanks in advance for any assistance.
Bemma
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