25% Withdrawal then Contributions - Tax Relief?

maximoose94

Hi all

Helping a friend sort out their pension. They currently have a Pension with SW that is called a Retirement Account. 
Around 3 years ago they withdrew money out of this - 25% and all was tax free. I believe the rest was put into flexi drawdown hence the Retirement Account name.
My friend is now employed (she wasn't previously) and wants to contribute heavily to her new pension with HL (transferring in SW) and get tax relief on contributions.
Has she triggered the MPAA of £4k by taking the 25% tax free lump sum several years ago? Can she contribute up to her gross earnings and get tax relief still? 

ffacoffipawb

If only the PCLS was taken then the MPAA has not kicked in.

There are complicated recycling rules when a PCLS has been taken less than 5 years ago that may limit future contributions. Too complicated to explain by myself, may be worth a google?

Audaxer

ffacoffipawb said:

If only the PCLS was taken then the MPAA has not kicked in.

There are complicated recycling rules when a PCLS has been taken less than 5 years ago that may limit future contributions. Too complicated to explain by myself, may be worth a google?

I agree she needs to check the recycling rules, but as I recall the 5 year period covers the 2 tax years before and 2 tax years after the PCLS was taken, so she may be okay if the PCLS was taken 3 years ago.

maximoose94

Thanks both. It looks like the only rule she wouldn't meet is pre planning. She took the 25% PCLS to pay solicitor fees on new property several years ago, and now wants to contribute as she's earning a good salary.
How on earth would you prove to HMRC that it wasn't pre planned? I've said to just keep records of what/when the money was used for. 

Albermarle

Firstly , the number of people who actually fall foul of HMRC recycling rules appears to be very low/zero, so I wouldn't worry about it too much, especially if there seems to be some fair justification in this case.
Secondly your friend should not rush to transfer the SW pension to HL until she is completely clear on the comparative charges and the reason for doing it .
If the SW pension is an ex workplace pension then there could be discounts from the standard charges ( often not obvious from the paperwork ) . Plus of course HL are not that cheap. 
My SW workplace pension admin/platform charge is less than half of HL's , for example. Plus some of the SW funds are very low price , lower than you get for similar with HL. 

jamesd

New job is one of the HMRC examples that is fine. If asked she can prove what the money was for.

HMRC examples look back more than two years to determine the expected level of contributions to use for the five year rule. She can relax, for rules that have been in place for a long time there are still no known cases of them being applied to individuals. They were designed to stop organised schemes - obvious preplanning - and they worked.