Is withdrawing from one pension and then depositing to another pension and getting 20% topup poss?

Marcon

Pat38493 said:

Marcon said:

izawa said:

Even though the person withdraws from another pension? To put into another pension?

Yes. You need to accept you're wrong here - your friend is right.

Well to be fair, it does seem a bit strange that you are allowed to do that, but yes it’s true.   But only with the relatively trifling amounts discussed above.  If you try to do it with larger amounts you will certainly run into problems.

No; very few people run into problems. 

Plenty of good, clear explanations of the rules if you google - e.g. https://techzone.abrdn.com/public/pensions/tech-guide-recycle-tax-free-cash from which I've extracted the following for ease of reference:

Assuming the recycling was pre-planned, an unauthorised payment charge will apply to the tax free cash taken if all of the following limits are exceeded.

• The tax free cash (including any tax-free cash taken in the past 12 months) is more than £7,500 and
  
• The total of the increases in pension payments in the tax year (and the two tax years either side) is at least 30% of the tax free cash taken, and 
• The pension payments made are significantly larger (generally 30%) than might be expected.

If recycling is kept within these limits, tax free cash can be used to make payments into a pension scheme (even with pre-planning).

It's also worth noting that tax free cash can be used to fund someone else's pension without falling foul of the tax free cash recycling rules - for example, making payments to a pension for a spouse/partner, child or grandchild. The rules only apply when the individual is recycling tax free cash back into a pension in their own name.

Audaxer

izawa said:

Even though the person withdraws from another pension? To put into another pension?

Even in the same pension. Many people on here pay in £2,880 to a SIPP, leave as cash and once the tax relief is added withdraw £3,600 and repeat the process each tax year. There is a very long thread on the subject in this forum:
Paying £2880 into pension when retired — MoneySavingExpert Forum

pensionpawn

Audaxer said:

izawa said:

Even though the person withdraws from another pension? To put into another pension?

Even in the same pension. Many people on here pay in £2,880 to a SIPP, leave as cash and once the tax relief is added withdraw £3,600 and repeat the process each tax year. There is a very long thread on the subject in this forum:
Paying £2880 into pension when retired — MoneySavingExpert Forum

I'm going to be throwing £2880 into my wife's smaller pot every year until she's 75. Even if I pay tax on the way out of my pension we're refunded it on the way into hers. As she's not going to take more than her personal allowance pa, it's a good strategy for minising her net withdrawals. 

sgx2000

Audaxer said:

izawa said:

Even though the person withdraws from another pension? To put into another pension?

Even in the same pension. Many people on here pay in £2,880 to a SIPP, leave as cash and once the tax relief is added withdraw £3,600 and repeat the process each tax year. There is a very long thread on the subject in this forum:
Paying £2880 into pension when retired — MoneySavingExpert Forum

But don't you then lose 20% of the £3600 to tax?

JGB1955

sgx2000 said:

Audaxer said:

izawa said:

Even though the person withdraws from another pension? To put into another pension?

Even in the same pension. Many people on here pay in £2,880 to a SIPP, leave as cash and once the tax relief is added withdraw £3,600 and repeat the process each tax year. There is a very long thread on the subject in this forum:
Paying £2880 into pension when retired — MoneySavingExpert Forum

But don't you then lose 20% of the £3600 to tax?

25% of it will be paid tax free, so only £2,700 is taxable.

sgx2000

JGB1955 said:

sgx2000 said:

Audaxer said:

izawa said:

Even though the person withdraws from another pension? To put into another pension?

Even in the same pension. Many people on here pay in £2,880 to a SIPP, leave as cash and once the tax relief is added withdraw £3,600 and repeat the process each tax year. There is a very long thread on the subject in this forum:
Paying £2880 into pension when retired — MoneySavingExpert Forum

But don't you then lose 20% of the £3600 to tax?

25% of it will be paid tax free, so only £2,700 is taxable.

So.. a lot of messing to gain £180???  minus any fee's from the second sipp??

molerat

sgx2000 said:

JGB1955 said:

sgx2000 said:

Audaxer said:

izawa said:

Even though the person withdraws from another pension? To put into another pension?

Even in the same pension. Many people on here pay in £2,880 to a SIPP, leave as cash and once the tax relief is added withdraw £3,600 and repeat the process each tax year. There is a very long thread on the subject in this forum:
Paying £2880 into pension when retired — MoneySavingExpert Forum

But don't you then lose 20% of the £3600 to tax?

25% of it will be paid tax free, so only £2,700 is taxable.

So.. a lot of messing to gain £180???  minus any fee's from the second sipp??

Messing around ?  Pay it in by debit card then once the tax credit has been applied take it out.  No messing around involved except maybe in the first year but that can be minimised with a careful first withdrawal.  And no fees involved in the majority.  Not many accounts paying a one off 6.25% for holding your money for a couple of months, equivalent to around 36% APR.

dunstonh

sgx2000 said:

JGB1955 said:

sgx2000 said:

Audaxer said:

izawa said:

Even though the person withdraws from another pension? To put into another pension?

Even in the same pension. Many people on here pay in £2,880 to a SIPP, leave as cash and once the tax relief is added withdraw £3,600 and repeat the process each tax year. There is a very long thread on the subject in this forum:
Paying £2880 into pension when retired — MoneySavingExpert Forum

But don't you then lose 20% of the £3600 to tax?

25% of it will be paid tax free, so only £2,700 is taxable.

So.. a lot of messing to gain £180???  minus any fee's from the second sipp??

a couple of button presses and barely any fees. Potentially none of note if you use the right provider.

sgx2000

molerat said:

sgx2000 said:

JGB1955 said:

sgx2000 said:

Audaxer said:

izawa said:

Even though the person withdraws from another pension? To put into another pension?

Even in the same pension. Many people on here pay in £2,880 to a SIPP, leave as cash and once the tax relief is added withdraw £3,600 and repeat the process each tax year. There is a very long thread on the subject in this forum:
Paying £2880 into pension when retired — MoneySavingExpert Forum

But don't you then lose 20% of the £3600 to tax?

25% of it will be paid tax free, so only £2,700 is taxable.

So.. a lot of messing to gain £180???  minus any fee's from the second sipp??

Messing around ?  Pay it in by debit card then once the tax credit has been applied take it out.  No messing around involved except maybe in the first year but that can be minimised with a careful first withdrawal.  And no fees involved in the majority.  Not many accounts paying a one off 6.25% for holding your money for a couple of months, equivalent to around 36% APR.

Is this done by paying into the same sipp each year, or do you have to start a new sipp each year? 
(sorry if this sounds stupid... But I am here trying to learn)

molerat

Same each year. Some you have to keep a nominal amount in to keep open