Tax free Lump sum and Sipp

thebullsback

If a person retired and used some of there FS pension lump sum to purchase a Sipp would this breach the recycling rules. £30000 lump sum £5000 into Sipp

Albermarle

The first point is that you would have to have sufficient 'relevant earnings ' to gain tax relief on the £5000 . If not then the max you could add was £2880 .
Whether it would breach recycling rules would depend on other issues . It looks like not .
https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/pension-lump-sum-recycling

and, the cumulative amount of the additional contributions exceeds 30% of the tax-free cash amount. 

thebullsback

So if the indervidual retired then returned to full time employment earning £21000 pa before the Sipp was taken out they would not have broken any rules ?

Albermarle

Probably not, i do not memorise the exact rules .
In any case it seems that the rules were put in place to stop wholesale fraud and HMRC would not pursue you for recycling £5 K  anyway . Off their radar I think .

xylophone

Have you taken income from any of your DC pensions (other than under the small pot rules)?
If so, check out MPAA.
Regardless of your earnings, you would be limited to a gross contribution of £4000 per annum.
https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/money-purchase-annual-allowance-mpaa/#:~:text=Next%20Steps-,What%20is%20the%20MPAA%3F,a%20tax%20charge%20is%20payable.

thebullsback

thank you for you input and time Albermarle . Cheers

thebullsback

The only Pension that would be taken is the FS one. No other pots or pensions have been touched.