How much can I put into a SIPP whilst receiving a salary and two DB pensions?

NickPoole

Linton said:

NickPoole said:

Once pensions are in payment does any increase in value contribute to annual allowance limit?

No, the annual allowance solely relates to new money coming into one's pensions from outside. What happens within pensions is irrelevent.

um - I might be confused, but the classic part of my pension is related to my final salary, so even though I get no more service a big raise in pay will cause an increase in pension, and thus the pension input will use up annual allowance

NickPoole

Circumstances where the recycling rule does not apply

An individual might pay significantly greater contributions as part of normal retirement planning and might simply fund those contributions from the sale of investments, deductions from salary, salary sacrifice, redundancy sacrifice or from existing savings.

(but there is more ... this has been discussed a lot elsewhere and I suspect it would be very hard for HMRC to make a recycling case and unless you were actually recycling AND they could prove it (probably by you saying so) - the onus seems to be on them to prove recycling tax free cash was your plan.)

Linton

gundo said:

NoMore said:

Money is fungible. It’s not about which account or where specifically the money comes from. It’s about if the lump sum enabled you to increase your contributions. This may be for example you can increase your workplace contributions from salary because you can replace that income with the lump sum. 

I have no idea on your personal circumstances or if you would be considered as recycling but saying it comes from salary does not make a difference to HMRC deciding if it’s recycling or not. 

It won't come from the lump sum (that's in the Cash ISA and the rest is emergency/play fund). But I was planning on diverting the income from one of my DB pensions that's already paying into the SIPP as regular monthly payments. Would that count as recycling (not lump sum but income from a DB pension)?

It doesnt matter which account the pension contributions actually come from.  The relevent test is whether taking a tax free lump sum is enabling you to increase your pension contributions in the short term beyond what is normal.

So saving the DB pension and taking a TFLS to make an extra SIPP contribution is no different to saving the TFLS and making the extra contribution from your saved DB pension, both could be considered evidence of recycling.

On the other hand, if you normally just pay part of your DB income into a SIPP, then use the TFLS to  continue paying the same amount into the SIPP whilst increasing your DB savings there is no recycling.

Albermarle

NickPoole said:

Circumstances where the recycling rule does not apply

An individual might pay significantly greater contributions as part of normal retirement planning and might simply fund those contributions from the sale of investments, deductions from salary, salary sacrifice, redundancy sacrifice or from existing savings.

(but there is more ... this has been discussed a lot elsewhere and I suspect it would be very hard for HMRC to make a recycling case and unless you were actually recycling AND they could prove it (probably by you saying so) - the onus seems to be on them to prove recycling tax free cash was your plan.)

In simple terms if you get a tax free lump sum from a pension, and around that time you increase your pension contributions, then you are potentially recycling and you need to check the rules. It does not matter if you are not actually directly funding the increased contributions from the lump sum, it can still be recycling.

However the second part of your post is correct in that there is scope for argument about intent etc and in reality there seems to be very few people ( if any ) actually pursued by HMRC on the subject.
I understand the main reason behind the recycling rules was to stop fraud gangs who had been doing it on a more industrial scale ( I do not know the detail of how it worked)