Uncrystallised DB pension reduced in value

Jeffmusicals

https://forums.moneysavingexpert.com/discussion/comment/82012086#Comment_82012086

Thank you for your reply although I was lead to understand that if my contributions increased significantly to previous patterns and more than 30% it could be considered as recycling as they could argue that my taking my lump and relying my mortgage allowed me to apply my yearly bonuses via salary sacrifice into my DC scheme. My

My normal annual contributionare around £15k pa so adding a £20k bonus in would be trigger the more than 30% yearly and lump sum over a 5 year period of tax years..?

Jeffmusicals

https://forums.moneysavingexpert.com/discussion/comment/82012151#Comment_82012151

it’s probably marginal to be honest but it save me £850’a month in mortgage payments and after 40’uears of constant mortgages I would love the freedom and choices it May potentially offe I.e I could take a lower paid less stressful job..!.

Jeffmusicals

Thanks but how do they know the difference? I really wouldn’t want to fall foul of HMRC.!

Jeffmusicals

https://forums.moneysavingexpert.com/discussion/comment/82012164#Comment_82012164

.Again, thanks for the really comprehensive reply (and warning), it’s appreciated.

My wife doesn’t have a personal pet pension, just a very small local authority pension and is a non tax-payer. I’d be happy to gift it but it wouldn’t solve the “problem” of trying to clear my mortgage down.

I tried so hard last time of the DB transfer and had advice but I think from memory it was going to cost about £7-£10k with no guarantee of the advice going in my favour (I know that isn’t the definition of “advice” but you get my meaning!). And also finding a scheme that will take if based on negative advice even if a stakeholder is supposed to accept any transfer providing I’ve taken “advice”.

I think the house in France dream is dead now but I’d settle for a Caravan 😄

Jeffmusicals

Thank you. I guess the problem is that they are all “could be” and without definitive HMRC guidelines it’s difficult to know what to do. And the penalties are really punitive!

LHW99

My wife doesn’t have a personal pet pension, just a very small local
authority pension and is a non tax-payer. I’d be happy to gift it but it
wouldn’t solve the “problem” of trying to clear my mortgage down.

Well it could, if she then used part / all of her TFLS to help pay down the mortgage. Financial planning generally works better if you plan as a couple, even if you keep eg separate bank accounts.

Jeffmusicals

https://forums.moneysavingexpert.com/discussion/comment/82012723#Comment_82012723

Thank you. We do share everything and there are no separate accounts as such . Her TFLS was a mighty £10k which she is keeping for a rainy day 😄.

Marcon

My wife doesn’t have a personal pet pension, just a very small local authority pension and is a non tax-payer. I’d be happy to gift it but it wouldn’t solve the “problem” of trying to clear my mortgage down.

Have you clocked that if she pays £2,880 into a personal pension, the kindly taxman will top it up to £3,600 even if she hasn't paid tax in the first place? If she has any earned income (pensions in payment don't count), she could possibly contribute more and get tax relief at the basic rate added to her pension pot.

but it wouldn’t solve the “problem” of trying to clear my mortgage down.

Does your current workplace pension allow partial transfers out? If so, you could transfer just under £10K to each of 3 separate personal pension plans (or transfer that amount to HL, who will, according to repeated reports on this forum, carve it out for you to 3 lots of £10K) and then take all 3 pots specifying that you want to do so under the 'small pots' regime* (so you need to make sure before transferring that the personal pension provider offers withdrawals under the regime - they don't have to and not all do).

£7,500 would be tax free and you'd pay tax on the rest, but that would make a decent dent in your mortgage - and no danger of falling foul of recycling rules as your tax free cash would only be £7,500 in a 12 month period. If your wife saw fit to use her £10K rainy day money to pay down some more of the mortgage, on the understanding you'd contribute to her pension or some such…that's your mortgage more than halved.

*very important because if you use this route, you don't trigger the Money Purchase Annual Allowance even though you are withdrawing taxable cash. If you trigger the MPAA, you are limited to total contributions (employee + basic rate tax relief, + employer) of £10K for each tax year, with no chance to use carry forward.

RogerPensionGuy

The lonk below maybe helpful.

I actually asked HMRC a few years back about the recycling rules, they sent me as I was paranoid about breaking their rules.

I though the rules were actually clear enough if read slowly IIRC.

*******

Taking tax-free cash and pension recycling rules – what you need to know | HL https://www.hl.co.uk/news/taking-tax-free-cash-and-pension-recycling-rules-what-you-need-to-know

Marcon

I actually asked HMRC a few years back about the recycling rules, they sent me as I was paranoid about breaking their rules. 

I though the rules were actually clear enough if read slowly IIRC. 

I don't think you'll find any pensions professional agreeing with you! They are generally seen as some of the wooliest and vaguest around, giving HMRC plenty of wriggle room. The issue of recycling crops up regularly on this forum, with people hoping that someone posting here will be able to confirm…. Although it's sometimes possible to explain why something definitely is going to be seen as recycling, there are far too many instances where the answer is quite simply 'don't know and can't tell'.

The link you've given is helpful, but written for a particular purpose and extremely focussed, so covering very limited ground. It's light years away from being a comprehensive explanation, nor is it intended to be.