Lump Sum Contribution and Immediate Draw Down

banky777

Linton said:

Are you still planning to pay for your pension contributions by circulating the same £30K?  If so it may be worthwhile having a look at https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm133810

Thanks. Effectively, yes. But I've checked with Standard Life and they confirmed I wouldn't be breaking any rules.

banky777

QrizB said:

banky777 said:
Have I finally got it?

Yes!

But ...

If you're going to do this over an extended period, rather than as a lump sum, could you increase your salsac contributions by an equivalent amount instead? Then you'd save on NI as well as on income tax.

Ooh, that's a good idea. I'll look into it. Thanks.

Notepad_Phil

banky777 said:

Linton said:

Are you still planning to pay for your pension contributions by circulating the same £30K?  If so it may be worthwhile having a look at https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm133810

Thanks. Effectively, yes. But I've checked with Standard Life and they confirmed I wouldn't be breaking any rules.

Are you sure they really confirmed that in an official manner? If you rang and talked to someone then unless you've had a written reply then there's always the chance that either you or they have misinterpreted something, and if you're looking on a website then there's usually something written along the lines of 'Nothing on the pages of this site constitutes financial, legal or other professional advice in any way and you should consult your financial adviser or other professional adviser if you require any financial, legal or other professional advice.".

banky777

Notepad_Phil said:

banky777 said:

Linton said:

Are you still planning to pay for your pension contributions by circulating the same £30K?  If so it may be worthwhile having a look at https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm133810

Thanks. Effectively, yes. But I've checked with Standard Life and they confirmed I wouldn't be breaking any rules.

Are you sure they really confirmed that in an official manner? If you rang and talked to someone then unless you've had a written reply then there's always the chance that either you or they have misinterpreted something, and if you're looking on a website then there's usually something written along the lines of 'Nothing on the pages of this site constitutes financial, legal or other professional advice in any way and you should consult your financial adviser or other professional adviser if you require any financial, legal or other professional advice.".

Thanks for this. I’ll get further clarification.

Reading through it though suggests that I wouldn’t be doing anything wrong. I have savings which I’m considering contributing to my pension and I also have a potential requirement to use some of my tax free lump sum to pay off my mortgage.

It looks like these would be considered as ‘normal retirement planning’. The fact that the amount I’m potentially paying in and the tax free amount I’m potentially withdrawing might be the same, hopefully, shouldn’t be an issue, but as I say, I’ll make sure I confirm this before doing anything, so thanks again for flagging this up.

banky777

Notepad_Phil said:

banky777 said:

Linton said:

Are you still planning to pay for your pension contributions by circulating the same £30K?  If so it may be worthwhile having a look at https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm133810

Thanks. Effectively, yes. But I've checked with Standard Life and they confirmed I wouldn't be breaking any rules.

Are you sure they really confirmed that in an official manner? If you rang and talked to someone then unless you've had a written reply then there's always the chance that either you or they have misinterpreted something, and if you're looking on a website then there's usually something written along the lines of 'Nothing on the pages of this site constitutes financial, legal or other professional advice in any way and you should consult your financial adviser or other professional adviser if you require any financial, legal or other professional advice.".

Hi, just a further update. Standard Life have sent me an email which says that my scenario would not be treated as recycling because the money would be coming from savings, not another pension pot.

So the way I see it, I can only gain from doing this. My only dilemma at this point is whether to only contribute the optimum amount over the next 3 tax years to benefit from the higher rate relief rebate, which would be around £2K, or just lump the whole £30K into my pension now, in the reasonable hope that growth on the portion I might have delayed investing, plus the RAS, would be around, if not more than, the couple of grand I'd get back through self-assessment.

As I'd be withdrawing my first tax free lump sum of £30K to pay off my mortgage at the end of the year, it 'feels' better to get as much back into my pension as soon as possible, but I'm still not sure!

Notepad_Phil

banky777 said:

Notepad_Phil said:

banky777 said:

Linton said:

Are you still planning to pay for your pension contributions by circulating the same £30K?  If so it may be worthwhile having a look at https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm133810

Thanks. Effectively, yes. But I've checked with Standard Life and they confirmed I wouldn't be breaking any rules.

Are you sure they really confirmed that in an official manner? If you rang and talked to someone then unless you've had a written reply then there's always the chance that either you or they have misinterpreted something, and if you're looking on a website then there's usually something written along the lines of 'Nothing on the pages of this site constitutes financial, legal or other professional advice in any way and you should consult your financial adviser or other professional adviser if you require any financial, legal or other professional advice.".

... but I'm still not sure!

So it sounds as though there's two options you're considering. In such cases I'd either see if I could perhaps do a bit of both as a mid-way third option or if that's not possible then just flick a coin. Many's the time I realised what I really wanted to do whilst the coin was in mid-flight.

94JDH

Slightly different but makes an interesting read:

https://www.telegraph.co.uk/money/pensions/state-pensions/pension-lump-sum-recycling-how-avoid-breaking-hmrc-rules/#:~:text=Pension recycling refers to the,paying it into your pension.