Paying into DC Pension in the same year as receiving benefits

jamesd

nivag said:

Thanks for this. Say my tax free amount was £100k, but my total pension contributions are less than £30k, I read it as that it is less than 30%, it would not be considered recycling?

First, did you plan to use the tax free lump sum for recycling at the time you decided to take it or was it a normal part of your retirement planning anyway? No pre-planning, no breach of the recycling limits. And since it's DB and you're retiring, chances are that this applies.

Next test looks at the increase in pension contributions above what would be expected from your normal pattern of contributing. So if you've done 30k for ten years, 30k is nil increase because 30k is what is expected before the tax free lump sum.

Looking at the total increase above what would be expected for the last two years, the year you take the lump sum and the following two years, what is the value of that increase? Is it more than the £30k which is 30% of the £100k? If it's not more than that then it's recycling within the permitted limits and no problem.