Retiring - Pension recycling worry

Puddleskipper

My question is – if I take the £25k PCLS from my DB Scheme will the fact that I have made voluntary contributions to my DC scheme since 2016 through my monthly pay along with personal payments be construed as Pension Recycling now as I’ve benefited from the Tax Relief on these payments and I will be retiring and taking my DB Scheme lump sum tax free. I will be closing the DC Scheme at the end of this year and using that fund as Drawdown going forward into my old age years. I will not be using any of the £25K tax free lump sum from my DB Scheme to pay into my DC Scheme as I know that is definitely Recycling but I’m worried now about my Voluntary and Personal payments over the past few years into my DC Scheme being considered as pre-planned Recycling which I’d never even considered or heard of until now.

xylophone

My question is – if I take the £25k PCLS from my DB Scheme will the fact that I have made voluntary contributions to my DC scheme since 2016 through my monthly pay along with personal payments be construed as Pension Recycling now as I’ve benefited from the Tax Relief on these payments and I will be retiring and taking my DB Scheme lump sum tax free.

No.

I will be closing the DC Scheme at the end of this year and using that fund as Drawdown going forward into my old age years. 

Even though you will have no "relevant earnings" it would be possible for you to contribute up to £2880 (net) per annum to your DC Scheme and benefit from tax relief of up to £720 which will be claimed by the provider and added to your pot.

If your existing stakeholder does not offer you flexibility, you could transfer to a scheme that does before accessing this pension.

Albermarle

Firstly the commutation rate ( lump sum /pension given up) for the pension is pretty good, so all other things being equal, it would indicate that taking the lump sum would be a good idea.

The wording on 'pre planning ' in the govt. tax manual is that they have to somehow prove it was pre planning .
As you increased your contributions 6 years ago, and you are only taking a 25K PCLS , then I would think the chances of HMRC taking any interest is about zero.

Recycling legislation seems to be  mainly a deterrent to large scale fraud and not to chase around the likes of yourself.

It is sometimes commented on this forum that there is no evidence of any individual ever being adversely affected by recycling penalties ( although I guess not possible to know that for sure) 

hyperhypo

I would not be concerned over recycling. I've just been through similar events, IE taking some pcls and making my first £2880 payment to the uncrystallised part of my DC pension in last tax year, 2nd year after retiring.

Audaxer

Only if all of conditions listed in the HMRC page below are met, does the recycling rule apply:
 PTM133810 - Unauthorised payments: Deemed or specific situations that are unauthorised payments: recycling of pension commencement lump sums: overview - HMRC internal manual - GOV.UK (www.gov.uk)