Is this recycling?

jamesd

concernedpharmacist said:

In 2022 I intend to increase my contributions again (by more than 30%), but I will then be in receipt of my DB pension so will not be using the PCLS to fund this in any way.
It isn't my intention to recycle but I wondered if inadvertently I had created a problem by relying on my PCLS to pay off my mortgage.

There are no restrictions on using pension income to increase pension contributions. You will be able to prove that you didn't recycle the tax free lump sum by showing that it was used for the mortgage.

concernedpharmacist

jamesd said:

concernedpharmacist said:

In 2022 I intend to increase my contributions again (by more than 30%), but I will then be in receipt of my DB pension so will not be using the PCLS to fund this in any way.
It isn't my intention to recycle but I wondered if inadvertently I had created a problem by relying on my PCLS to pay off my mortgage.

There are no restrictions on using pension income to increase pension contributions. You will be able to prove that you didn't recycle the tax free lump sum by showing that it was used for the mortgage.

  So using the tfls to pay off the mortgage is ok?
Is this affected in any way by the fact that I had the funds in 2018 (through my endowment) to pay off the mortgage, but decided to use some of these funds to maintain/increase my pension contributions and to instead use the tfls to pay off the mortgage?
Could this effectively be considered the same as taking a "loan" paid back through the pcls?

crv1963

concernedpharmacist said:

jamesd said:

concernedpharmacist said:

In 2022 I intend to increase my contributions again (by more than 30%), but I will then be in receipt of my DB pension so will not be using the PCLS to fund this in any way.
It isn't my intention to recycle but I wondered if inadvertently I had created a problem by relying on my PCLS to pay off my mortgage.

There are no restrictions on using pension income to increase pension contributions. You will be able to prove that you didn't recycle the tax free lump sum by showing that it was used for the mortgage.

  So using the tfls to pay off the mortgage is ok?
Is this affected in any way by the fact that I had the funds in 2018 (through my endowment) to pay off the mortgage, but decided to use some of these funds to maintain/increase my pension contributions and to instead use the tfls to pay off the mortgage?
Could this effectively be considered the same as taking a "loan" paid back through the pcls?

No. This is because you cannot be told how to spend your TFLS, or any other lump sum. The way you are organising your monies is your business. As Jamesd said you can demonstrate that the TFLS was used for the mortgage repayment. You are not using the TFLS to pay into the DC pension but are using income, so it would be within the rules. 

jamesd

concernedpharmacist said:

  So using the tfls to pay off the mortgage is ok?

Yes, no issue at all, nor anything remotely close to one.

concernedpharmacist said:

Is this affected in any way by the fact that I had the funds in 2018 (through my endowment) to pay off the mortgage, but decided to use some of these funds to maintain/increase my pension contributions and to instead use the tfls to pay off the mortgage?
Could this effectively be considered the same as taking a "loan" paid back through the pcls?

The HMRC manual even has an example saying that an increase in contributions due to a windfall is fine. You know that money is mutable in time but your circumstances aren't those where that needs to be considered.

If you instead planned to take out a second mortgage to make higher pension contributions and repay with with the tax free lump sum then that is potentially subject to the charge and the amounts and five year rule would need to be considered.