Taking lumpsum and then contributing into pension - pension recycling ?

WindfallWendy

At risk of derailing the discussion, taking out a huge amount tax free is all well and good, but you'll end up paying interest on the lump, won't you? And then tax on the interest. Unless you spend it all very quickly. 

BlisteringBarnacles

WindfallWendy : Sorry missed your message. To answer your question : not really : The 25% cash lumpsum is taxfree, so no immediate tax on it.

Yes the money stays and grows tax free inside the pension wrapper, but ... once pension pot hits £ 1.07 Million (former LTA), i.e equivalent to a tax-free lumpsum of £268K, any growth on the 268K is taxed at income tax rates upon withdrawal.

OTOH, If I invested the 268K in a general investment account in equities I would pay capital gains tax and dividend tax which are still less than income tax, as the rules stand at the moment. Even if I invested in bonds or cash, my tax on the earnings would be the same as income tax rates.

I am not at £1.07 million (£268K tax free) just yet, but almost there : 1.01 mill. (25% is 254K).
I have made a fresh post on this topic today. Thank you.