SIPP part Crystallised and Future Contributions

Raggie

Hi All,

I'm getting confused on what my limits are for contributing to a pension after I part crystallise and take a 25% lump sum.

If for example I have £400k in my fidelity sipp, and I crystallised £100k of this I belive I have two pots.. one of £300k and one of £100k.

If I then take £25k tax free out of the £100k pot, can I continue to make regular payments into the £300k pot up to £60k per year?

Cheers

NoMore

You would take the 25% tax free at crystallisation (or lose the chance forever), so you would end up with 300k uncrystallised and 75k crystallised in the pension.

If this is your only pension and you have only took tax free cash, then yes you would still have the AA of 60k per year, whether you could take advantage of that would depend on your individual circumstances.

Taking any amount out of the crystallised portion above the tax free would trigger the MPAA of 10k p.a. from that point onwards.

Raggie

Great thank you. 

I make regular salary sacrifice payments into the pension of circa £28k, and will be getting a one off bonus this year of >£25k.. which would be useful for a house renovation project.. if I take the bonus as salary the income tax would be painful on this amount, but my company will pay it straight into the pension. My thinking is I could be proactive move the £100k into crystallisation (before the payment so not to look like recycling) take £25k out and keep the salary sacrifice going. 

As long as I can keep the regular payments going in all is 👍 

Baldytyke88

There is a £10k SIPP limit is a specific restriction for those who've already started flexibly using their pension.

 Do the MPAA apply?

NoMore

No idea if it would be classed as recycling or not, but timing of taking tax free cash is not a factor in determining if it is. HMRC will consider backwards and forwards 3 (possibly 5, I'm not sure) years from the point of getting tax free cash for recycling considerations.

Baldytyke88

NoMore said:

No idea if it would be classed as recycling or not, but timing of taking tax free cash is not a factor in determining if it is. HMRC will consider backwards and forwards 3 (possibly 5, I'm not sure) years from the point of getting tax free cash for recycling considerations.

I cashed in a pension 7 years ago, so I assumed that I would be limited to a contribution of £10k, but as I only earn £20k that isn't a problem.

People do comment that HMRC doesn't bring prosecutions for recycling.

NoMore

Baldytyke88 said:

NoMore said:

No idea if it would be classed as recycling or not, but timing of taking tax free cash is not a factor in determining if it is. HMRC will consider backwards and forwards 3 (possibly 5, I'm not sure) years from the point of getting tax free cash for recycling considerations.

I cashed in a pension 7 years ago, so I assumed that I would be limited to a contribution of £10k, but as I only earn £20k that isn't a problem.

People do comment that HMRC doesn't bring prosecutions for recycling.

I wasn't replying to you, but to the OP.

In your circumstances it does seem like you triggered the MPAA of 10k

Albermarle

Raggie said:

Great thank you. 

I make regular salary sacrifice payments into the pension of circa £28k, and will be getting a one off bonus this year of >£25k.. which would be useful for a house renovation project.. if I take the bonus as salary the income tax would be painful on this amount, but my company will pay it straight into the pension. My thinking is I could be proactive move the £100k into crystallisation (before the payment so not to look like recycling) take £25k out and keep the salary sacrifice going. 

As long as I can keep the regular payments going in all is 👍 

If you do not take the tax free cash at all, then recycling is a non issue.