SIPP in Drawdown whilst contributing to another DC scheme ?

Linton

0779mike said:

jamesd said:

0779mike wrote: »

I have noticed that no one is responding on this thread now, have I exhausted everyone's patience ?

No, it just means that the people who thought they could usefully reply happened to be doing other things.

0779mike wrote: »

Wait a minute, I already had a PCLS of £133k from a DC scheme in May 2019. So a contribution now of £39k would keep me below the 30% figure and thus I would fail a test, and not be a "recycler".

You're still a recycler, just within the limits.

0779mike wrote: »

...I will receive a taxable income of up to £78k this financial year comprising salary (£58k) and a DB pension that started paying in May this year (£20k).

There aren't any special restrictions on recycling pension income so from just the recycling rules aspect it's fine for you to increase your contributions by 39k + 20k = 59k.

But because only 58k is salary, 58k gross is the maximum you can pay in and get tax relief. You also need enough annual allowance but it seems clear that you have at least 18k of unused allowance in the last three years to carry forward so that doesn't limit you. Which means that 58k gross is likely be optimal.

Is the current DC scheme using salary sacrifice? Is it a relief at source scheme, one where employee contributions have 25% added to them to give the 20% basic rate relief? That affects the details of how you should do things.

No need to ask HMRC - don't. If you do, don't mention the offset mortgage, it wouldn't help because the rules catch borrowing.

The DC scheme into whch I am going to make the APC of £39,490 will add 25% to my payment.  So following on from the comment above, how should I do things ?

1) If your pension contributions are deducted after tax, to contribute £39490 into your pension you need to pay in £39490 X 0.8=£31592.  The missing 20% is paid into your pension by HMRC and the higher rate tax repaid directly to you.

0779mike

I don't understand that but I appreciate it has been several months since we discussed this.
Just to be recap, the pension deductions from my current, monthly, IBM salary are taken from my gross salary (i.e. before tax is applied).

This APC (not from salary) will be a one-off contribution calculated at just below 30% of the tax-free lump sum I took back in July when I started to take payment of my deferred final salary scheme with Aviva.  I think I need to pay the full £39,490 into the scheme to maximise tax avoidance.

Please confirm.

0779mike

I am looking for some input on the above, please.

Dazed_and_C0nfused

0779mike said:

I am looking for some input on the above, please.

I think this thread has got so confused no one really understands what you are doing, what method of pension contributions you are making (they work differently tax wise) etc so it's impossible for anyone to give you any meaningful comments.

0779mike

You may be right so I will start a fresh thread.