NHS pension - not sure whether to take standard or maximum lump sum

Mr_Crabbs

Mr_Crabbs said:

The additional pensions leaflet also says "HMRC will not allow you to withdraw a tax-free lump sum and receive further tax relief by reinvesting the money back into a registered pension scheme. This is known as ‘recycling lump sums’ and could apply if the money is reinvested as a lump sum or in monthly payments. You could be affected by this rule if you retire within two years of making an election to purchase additional benefits"

This seems odd to me. I suppose they are just covering themselves and trying to guide members, but I thought MPAA didn't apply to DB schemes? I hope not as that's the whole premise of our plan!

GunJack said:

You're right, MPAA doesn't apply to DB pensions, however the recycling rules are separate, it's been discussed at length on this forum...

Thanks. I was going slightly mad and confusing MPAA and recycling. I recall now I had looked at recycling and, though I'd got the percentage calculations wrong, established we're not recycling in that our plans are entirely independent of and don't rely on or re-cycle the lump sum.

GunJack

Must admit I've been over the recycling rules again and again.... I've got a CS pension to take at 60 but I'll be working another 2 years in my current private sector job and need to put all the CS pension effectively into the current DC scheme. I think I've cracked it now, as the auto lump sum from the CS is 3x the pension payable so if i put it all the pension into the DC that would be  33.33% of the ls, so I'll have to settle for slightly less going into the DC to keep the increased contributions to 29.95% of the lump sum and that is then NOT recycling... It's nuts, but them's the rules!!

The daft thing is that the PCLS lump sum will still be sitting in the bank for HMRC to look at, irrespective of how much I increase the DC contributions by, so how could it ever be "recycling of the lump sum"?!?!?!?

DRS1

I think they say money is fungible (whatever that means).

GunJack

DRS1 said:

I think they say money is fungible (whatever that means).

But that still doesn't make sense when the PCLS is sat in the bank untouched 🤣🤣

Andy_L

DRS1 said:

I think they say money is fungible (whatever that means).

it means that any pound is interchangeable with any other pound rather than them being unique, ie it doesn't matter that the, eg, The £20 note you withdraw from the bank is a different £20 to the one you paid in