pension query from a tax perspective - first timer

Hopeless2

Hello,
I have read numerous threads on here but we have never posted ourselves , some threads have been similar scenarios to ourselves and have been very helpful.
I am age 55 and receiving a final salary pension as of now, i also received a tax free lump sum from the scheme.   I am now paying into an employer Defined Contribution scheme taken from my salary each month .

I am aware that the tax free lump sum should not be paid back into your DC pot and have invested that into a savings account , and can easily show where that money went.

However as I now get both salary and the final salary pension I have increased my contributions considerably , I also receive bonuses , plus the fact that I am nearing retirement age I want to pay as much into the DC scheme as i can , without breaking any rules of course.

My concern is,  is this ok to do from a hmrc perspective ?   As i say I have paid my tax free lump sum that was generated with the DB into a savings account until decide what on earth to do with that but it certainly would not be going back into my DC pension.

thanks for any advice on this, 
Hopeless

Costabit

I don't know about your specific case here but am mightily interested in this " Tax Recycling " issues as have broadly similar concerns.
FWIW Tax Recycling rules were introduced to stop large scale avoidance and it seems rare, or if at all, that individuals are caught out and penalised. But it still bothers me re, our TFLS and increased contributions

Albermarle

FWIW Tax Recycling rules were introduced to stop large scale avoidance and it seems rare, or if at all, that individuals are caught out and penalised

It is often said that no one has ever been 'caught' , although difficult to say whether that is true or not.

The rules are clear though:  Pension Lump Sum Recycling - The Pensions Advisory Service

I am aware that the tax free lump sum should not be paid back into your DC pot and have invested that into a savings account , and can easily show where that money went.

It is not really relevant where you have put it . The above rules apply.

For some people there is a moral issue . The pension tax relief system in the UK is very generous , especially for higher earners. It is not really the idea that you take the TFLS and then use it to get more relief, but within the rules it is perfectly legal.

DT2001

If you follow this link https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/pension-lump-sum-recycling I think it will reassure you that you are O.K. You are increasing your contributions as a result of drawing your pension not from the lump sum. If you keep the lump sum intact in a savings account or ISA it cannot have been used for your pension. 
You can always set out your circumstances to HMRC and they’ll confirm their thoughts. I have found them very helpful even if not to my ‘advantage’.

Hopeless2

 thank you that is reassuring as the lump sum is safe and sound in a savings account earning nothing ,  i thought it was not intended to stop what i was doing as retirement gets closer with every year but only to stop those abusing the tax free lump sum

Hopeless2

Trugal2 this may help your scenario ?

Hopeless2

Albermarle said:

FWIW Tax Recycling rules were introduced to stop large scale avoidance and it seems rare, or if at all, that individuals are caught out and penalised

It is often said that no one has ever been 'caught' , although difficult to say whether that is true or not.

The rules are clear though:  I am aware that the tax free lump sum should not be paid back into your DC pot and have invested that into a savings account , and can easily show where that money went.

It is not really relevant where you have put it . The above rules apply.

For some people there is a moral issue . The pension tax relief system in the UK is very generous , especially for higher earners. It is not really the idea that you take the TFLS and then use it to get more relief, but within the rules it is perfectly legal.

I can’t post your link as new member but it is clearly to stop , and rightly so, those using the tax free lump sum to pay back into a pension , this would not apply to my circumstances and sudden increase in earnings and closing in on retirement age .
i May check with an IFA for assurance but morally I know what doing is right and what most folk would do at my age unless they needed to clear debts.

Albermarle

Hopeless2 said:

Albermarle said:

FWIW Tax Recycling rules were introduced to stop large scale avoidance and it seems rare, or if at all, that individuals are caught out and penalised

It is often said that no one has ever been 'caught' , although difficult to say whether that is true or not.

The rules are clear though:  I am aware that the tax free lump sum should not be paid back into your DC pot and have invested that into a savings account , and can easily show where that money went.

It is not really relevant where you have put it . The above rules apply.

For some people there is a moral issue . The pension tax relief system in the UK is very generous , especially for higher earners. It is not really the idea that you take the TFLS and then use it to get more relief, but within the rules it is perfectly legal.

I can’t post your link as new member but it is clearly to stop , and rightly so, those using the tax free lump sum to pay back into a pension , this would not apply to my circumstances and sudden increase in earnings and closing in on retirement age .
i May check with an IFA for assurance but morally I know what doing is right and what most folk would do at my age unless they needed to clear debts.

I am sure what you are doing is fine and related to your higher earnings . There has been a few debates on this forum about recycling as there are a few grey areas. Such as taking the TFLS and using it to bump up a ( working ) spouses pension and get extra tax relief. 

Hopeless2

yes i have ensured it is nothing to do with TFLS and that it is at arms length earning zilch in a bank account until I can decide what on earth to do with it , possibly put into a shares ISA  or property . 
 Thank you for you comments 

Albermarle

Hopeless2 said:

yes i have ensured it is nothing to do with TFLS and that it is at arms length earning zilch in a bank account until I can decide what on earth to do with it , possibly put into a shares ISA  or property . 
 Thank you for you comments 

There are a lot of people who come on to this forum , saying they have a pot of money/ sitting in a bank account doing nothing or an inheritance coming , and what would be the best thing to do with it.
So when the time is right you could do worse than come back here and have a scroll through some of those threads and see the kind of answers are given. Although always keep in mind that opinion plays a large part in investing and you will see different ones for sure !

Hopeless2

DT2001 said:

If you follow this link 
I think it will reassure you that you are O.K. You are increasing your contributions as a result of drawing your pension not from the lump sum. If you keep the lump sum intact in a savings account or ISA it cannot have been used for your pension. 
You can always set out your circumstances to HMRC and they’ll confirm their thoughts. I have found them very helpful even if not to my ‘advantage’.

I’m not even sure if it can be seen as recycling by increasing contributions partly as result of receiving a pension income now alongside Salary , it is such a grey area and I’m not sleeping lately worrying about it