Am i breaking any rules

chrisclay

Hello I have been reading posts on this forum and I think I understand the rules on recycling but it would be nice to have this confirmed.
We were late starting a pension due to a failed endowment mortgage so my pot is small.
My situation is this I have an old pension with Reassure that matures next month when I become 60 the pot is £13,000. I also have Nest pension that was started 2 years ago under auto enrollment, its value is around £22,000 and I intend to pay in around £10.000 a year and have
achieved this for the last 2 years. So what I had considered was taking the 25% from my Reassure pension that will be tax free then either paying this into my Nest pension or using it to pay for our holiday then paying the holiday money into the Nest Pension. From what I have read in this thread as my 25% is less than £7,000 Iam not breaking any rules could some one confirm that please

MK62

My understanding is that you will not break the recycling rules providing you do not exceed £7500 of tax free lump sum(s) in the 12 months preceding your latest TFLS payment (which is included in the calculation of course).

In your case, you will get £3250 TFLS, and if you have had no other TFLS from a pension in the preceding 12 months, then you are good.
This means though, that for the 12 months after this, you are limited to no more than £4250 in further TFLS. If you took more than that, even if you didn't use it as pension contributions, the first TFLS (£3250) could then be viewed as breaking the recycling rules, as you'd have received more than £7500 in TFLS within a 12 month period.

How strictly HMRC enforce the recycling rules is another matter, but if you break them, and HMRC do come looking, then you'd really have little defence tbh.

Albermarle

Just on a slightly different angle, are you sure that paying extra contributions into NEST is the best way forward ?
You lose 1.8% on every contribution and normally with pensions nowadays you don't pay anything for contributing. The 0.3% ongoing charge is competitive/low though.
So basically if you have a long way to retirement the 1.8% is spread over many years but as you are already 60, then....
So it may be worth considering a separate pension for the contributions over and above the auto enrolment ones.

xylophone

Had you considered transferring the whole of the Reassure pension into NEST?

https://www.nestpensions.org.uk/schemeweb/memberhelpcentre/transfers/transfer-money-into-nest.html

wjr4

Your ReAssure pension will remain as a pension so you do not need to do anything. Pensions do not 'mature', they just reach the normal retirement date. There is no need for you to take any money from the ReAssure pension. I'd leave it where it is. There is no need for you to withdraw money to pay it back in, apart from the tax relief. However, ReAssure do not offer drawdown so you would have to transfer this to a pension that does offer it. I have no experience with NEST drawdown plans.

chrisclay

Albermarle wrote: »

Just on a slightly different angle, are you sure that paying extra contributions into NEST is the best way forward ?
You lose 1.8% on every contribution and normally with pensions nowadays you don't pay anything for contributing. The 0.3% ongoing charge is competitive/low though.
So basically if you have a long way to retirement the 1.8% is spread over many years but as you are already 60, then....
So it may be worth considering a separate pension for the contributions over and above the auto enrolment ones.

Hi thanks for your response I know that £18.00 per thousand is quite high I have had a quick look around and the charges are quite varied and Nest is at the top but all I want is a pension that I can pay into every month sometimes varying amounts and not have to do much else, having said that I am quite willing to do more if there are significant savings to be made. I am hoping to pay another £70,000-£80,000 before I retire so the charges could be nearly £1500.00.
The big thing is to chose another pension provider and open an account.

chrisclay

MK62 wrote: »

My understanding is that you will not break the recycling rules providing you do not exceed £7500 of tax free lump sum(s) in the 12 months preceding your latest TFLS payment (which is included in the calculation of course).

In your case, you will get £3250 TFLS, and if you have had no other TFLS from a pension in the preceding 12 months, then you are good.
This means though, that for the 12 months after this, you are limited to no more than £4250 in further TFLS. If you took more than that, even if you didn't use it as pension contributions, the first TFLS (£3250) could then be viewed as breaking the recycling rules, as you'd have received more than £7500 in TFLS within a 12 month period.

How strictly HMRC enforce the recycling rules is another matter, but if you break them, and HMRC do come looking, then you'd really have little defence tbh.

Thanks for the information I have spoken to Reassure and I can open a draw down account take the 25% tax free and leave the rest to take when I retire.
I am also considering opening up a new pension with a different supplier to try to reduce the charges that am currently paying Nest

chrisclay

Albermarle wrote: »

Just on a slightly different angle, are you sure that paying extra contributions into NEST is the best way forward ?
You lose 1.8% on every contribution and normally with pensions nowadays you don't pay anything for contributing. The 0.3% ongoing charge is competitive/low though.
So basically if you have a long way to retirement the 1.8% is spread over many years but as you are already 60, then....
So it may be worth considering a separate pension for the contributions over and above the auto enrolment ones.

I have been thinking about your comments about the Nest charges and there is another option it is this I could open a Retirement account with Reassure then take a 20% tax free lump sum this would trigger an automatic transfer of 3 times that amount to a flexible draw down pot, but the remainder would remain in the flexible pension pot to which I could add further contributions to until retirement date and receive the tax relief. The Reassure charges are a lot les than Nest . At this point I am trying to maximise the size of my pension pot. It would be good to see some views on this plan

Albermarle

You have to balance the high initial charge with NEST , with the low ongoing charge .
Other pensions will typically have no initail charge but a higher ongoing charge . How high varies and will depend on what type of fund your money is invested in.
For example a typical SIPP charge is 0.25% , then plus the fund cost, whuch could be between 0.25% and 1 %.
Or a typical personal pension might charge 1% all in , then with a discount of say 0.3% .
Suggest you need to get clarity on the ongoing charges for reassure as a start.

chrisclay

Hello thanks for replying so quickly it would be a lot easier if the Nest pension had more reasonable contribution charges. I have copied the Reassure charges in to this message

The standard version of the Retirement Account has a lower charging structure than the offline version. This is because in the future this version of the account will be serviced online and we want to pass on the savings that online servicing brings to our customers.
● There’s an ongoing charge of 0.65% of the value of the funds each year for the standard version, and 0.75% of the value of the funds each year for the offline version. These are known as Annual Management Charges (AMCs).
● The funds bear their own investment expenses (including any fees charged by and rebates given by unit trust managers where applicable). The amount of the investment expenses varies by fund. These are incurred in addition to the AMCs, and the approximate range of charges are set out below:
These rates may vary in the future if the cost of administering the funds changes. How are the charges deducted?
● The yearly 0.65% AMC charge, and investment expenses, are taken into account when we set our daily unit prices each day. - The additional yearly 0.1% AMC charged on the offline version is deducted by cancelling the relevant number of units from individual policies every month.

Albermarle

So 0.65% is in line with what I already guessed at .
So you will need a calculator and have an idea of your ongoing contributions and when you intend to stop contributing. Then work out which is cheapest, maybe there will not be much difference in the end, difficult to say.
Then the next step is to compare the type of funds you are invested in for each pension.
Are they a similar risk/reward profile, and what are the possibilities for alternative funds within each pension , in case you wanted to change?
In the end the type of investment your money is actually in ( and how it performs) is more important than the charges issue.