Defined benefit pension recyling?

woodbine68

I think this may have been answered for the PCLS but not the pension itself so here goes due to the difficulty of transfering a DB into a DC pension 
and the fact that I will shortly be 55.
If I were to take my DB pension early@55 with a 100k lump sum and 15k pension per year, carry on working salary £55K and paying into a DC pension 10% of my salary  via salary sacrifice I dont expect to retire for another 10 years. Can I do the following 
A put the full 15k into my DC pension if I up my contributions to 30% of salary?
B put the 100k into my DC pension to attract the 25% top up from the government and make it 125k
Woodbine

MX5huggy

A - Yes

B - No total pension contributions each year that receive tax relief is limited to your salary that year. There is also the £40k Annual Allowance but as you can carry forward up to 3 years of that you could do it over 2 or 3 years. 

Salary Sacrifice is limited to the point that your pay must not be reduced below the National Minimum Wage (£9.50 per hour).

jimi_man

Actually B is possible, but just not in one year, you'd need to do it over several.

There is also the issue of recycling that you've already alluded to. Probably worth reading all the rules. A good guide is here.

Recycling of tax-free cash - Royal London for advisers

As far as I'm aware, no-one has ever been prosecuted for falling foul of the rules, however that's not to say go ahead and break them. 

Silvertabby

Would your DB pension and lump sum be reduced for early payment if taken at 55?

Malthusian

The answer to B is "no" as this meets all the conditions for tax free cash recycling. You can however increase your current contributions by 30% without falling foul of the rules.

When someone breaks the recycling rules, HMRC dings them for it and they accept it's a fair cop and pay up, it doesn't get publicised, so there is no particular reason anyone would have heard of it happening. For it to enter the public domain, someone would have to be pig-headed enough to take it all the way to the tribunals.

Albermarle

So with A, you would continue to pay no 40% tax , and have no recycling issues, so looks like the  ideal solution.