Tax free 25%

Ed-1

Upon reaching age 57 can you pay pension contributions, get 20% tax relief then immediately take 25% tax free?

Marcon

Yes if you're contributing to a defined contribution arrangement (and currently you only need to reach age 55 to access the funds).

Ed-1

Marcon said:

Yes if you're contributing to a defined contribution arrangement (and currently you only need to reach age 55 to access the funds).

What about a SIPP?

Marcon

Ed-1 said:

Marcon said:

Yes if you're contributing to a defined contribution arrangement (and currently you only need to reach age 55 to access the funds).

What about a SIPP?

What about it? A SIPP is a defined contribution arrangement.

Albermarle

Ed-1 said:

Upon reaching age 57 can you pay pension contributions, get 20% tax relief then immediately take 25% tax free?

Of course you need the taxable income to get any significant tax relief.
Also the 75% of the pension left is liable for income tax , so your actual overall tax gain is 6.25% , unless you can take some of the taxable income below your personal allowance once you stop working.

jamesd

Nothing prevents this and it's entirely within the rules. There's a thread here related to paying in 2880 net and getting out 3600 gross a year where that's one possible way to do it, though I prefer monthly payments and use them myself.

Many schemes will make you wait for the tax relief until HMRC pays them. Many, notably traditional insurance companies, won't.

Ed-1

Albermarle said:

Ed-1 said:

Upon reaching age 57 can you pay pension contributions, get 20% tax relief then immediately take 25% tax free?

Of course you need the taxable income to get any significant tax relief.
Also the 75% of the pension left is liable for income tax , so your actual overall tax gain is 6.25% , unless you can take some of the taxable income below your personal allowance once you stop working.

Doesn't the money purchase annual allowance of £4,000 affect how much tax relief you can get in future though once you've taken it back out the pension?

Albermarle

Ed-1 said:

Albermarle said:

Ed-1 said:

Upon reaching age 57 can you pay pension contributions, get 20% tax relief then immediately take 25% tax free?

Of course you need the taxable income to get any significant tax relief.
Also the 75% of the pension left is liable for income tax , so your actual overall tax gain is 6.25% , unless you can take some of the taxable income below your personal allowance once you stop working.

Doesn't the money purchase annual allowance of £4,000 affect how much tax relief you can get in future though once you've taken it back out the pension?

If you only take the tax free cash then the MPAA is not triggered . As soon as you take any income that is taxable it is triggered .

Ed-1

Albermarle said:

Ed-1 said:

Albermarle said:

Ed-1 said:

Upon reaching age 57 can you pay pension contributions, get 20% tax relief then immediately take 25% tax free?

Of course you need the taxable income to get any significant tax relief.
Also the 75% of the pension left is liable for income tax , so your actual overall tax gain is 6.25% , unless you can take some of the taxable income below your personal allowance once you stop working.

Doesn't the money purchase annual allowance of £4,000 affect how much tax relief you can get in future though once you've taken it back out the pension?

If you only take the tax free cash then the MPAA is not triggered . As soon as you take any income that is taxable it is triggered .

Some pension providers/plans don't allow you to only take the tax free cash. All withdrawals are 25% tax free, 75% taxed.

Albermarle

Ed-1 said:

Albermarle said:

Ed-1 said:

Albermarle said:

Ed-1 said:

Upon reaching age 57 can you pay pension contributions, get 20% tax relief then immediately take 25% tax free?

Of course you need the taxable income to get any significant tax relief.
Also the 75% of the pension left is liable for income tax , so your actual overall tax gain is 6.25% , unless you can take some of the taxable income below your personal allowance once you stop working.

Doesn't the money purchase annual allowance of £4,000 affect how much tax relief you can get in future though once you've taken it back out the pension?

If you only take the tax free cash then the MPAA is not triggered . As soon as you take any income that is taxable it is triggered .

Some pension providers/plans don't allow you to only take the tax free cash. All withdrawals are 25% tax free, 75% taxed.

These are mainly older pensions . If you want more flexibility then just move to a newer one . It is a relatively simple exercise nowadays on the internet and normally with no cost ,

kuratowski

When I first saw this thread I thought someone was going to mention the pension lump sum recycling rules.  Ed-1 hasn't fully explained what they are trying to do here, but I wonder if there is any risk that they could come into play.