[Closed] Personal Pension question

No.

Once you draw down your pension, you can't continue to get pension tax relief. Catches a lot of people out as some pensions mature before others.

Thanks Footflaps that is interesting .   So after starting any withdrawal  from pension to lose all tax relief , so would be better popping it into an Isa after that point.

Yep, or deferring a pension if you can, so as to keep tax relief.

I thought the amount you could get tax relief on was just more limited?  Changing from £10k pa to £4k pa recently?  Regardless, what you are suggesting is what they call recycling and naturally HMRC aren't keen

Does seem quite complex...

http://www.scottishwidows.co.uk/Extranet/Literature/Doc/FP0621

I thought the goverment were very keen on recycling !!!!!

That’s an interesting conundrum footflaps. I’m due my RAF pension from 60, but my British Airways pension runs to 65. Does that mean I can’t draw any of my RAF pension and still get tax relief on my money purchase scheme? Lots of people receive a military officers pension after 16 years service at age 38, I can’t believe they get no tax relief?

>Does that mean I can’t draw any of my RAF pension and still get tax relief on my money purchase scheme?

My understanding is you risk getting penalised by HMRC for pension recycling.

If it was me, I'd give HMRC a call and ask them what the rules are.

You used to be able to do that but they stopped it.

AFAIK if you draw a pension eg under the pension freedoms which is possible after 55 your future pension contribution limits are REDUCED but not to zero. The numbers are something like £40k pa normally reduced to £4k pa after a pension drawdown.

As for pensions drawn normally, ie not earlier than scheme early afaik they do not affect yoir allowances but HMRC want to see you have sufficient salary to make the new contributions and are not recycling. I have one scheme drawable at 50 and have asked the question before but rules do change.

You can take a final salary pension, including a 25% lump sum, and still contribute up to the amount you earn, subject to the £40k annual allowance and the lifetime allowance. I think (but may be wrong) that you can take an annuity from a personal pension similarly.

But if you take lump sums from your personal pension pot, your annual allowance from that day forward is £4k. This is known as Uncrystallised Funds Pension Lump Sum (UFPLS).

The word uncrystallised refers to the concept that when you take your final salary pension, or buy an annuity with your pot, that's the crystallisation of your pension, and the value that counts for lifetime allowance. If you take a lump sum out without buying an annuity, you haven't crystallised it, so it's referred to as uncrystallised.

In trying to be helpful I’ll sound like a resident grumpy bar steward but there’s so much misinformation here from people trying to be helpful but slightly misinformed.

OP - there are specific rules about recycling tax free cash. It’s complex but HMRC would look at whether it was planned, whether contributions were 30% or more of what was typically expected (again, complex) whether your TFC was over £7,5k. Generally just not a good idea.

Two other quick points:

In respect of the other replies, accessing your benefits flexibly means a reduced annual allowance to £4K (from April).

Taking a pension as a lump sum is still crystallising benefits and will count towards lifetime allowance. The only exemption is the small pots exemption which is a separate complicated are.

hope that helps.

In trying to be helpful I’ll sound like a resident grumpy bar steward but there’s so much misinformation here from people trying to be helpful but slightly misinformed.

You say that every time pension questions crop up but have never said why you are the one who's advice should be followed. I know F all about pension legislation but there are a number on here who seem to know what they are talking about.

Who do we believe?

You say that every time pension questions crop up but have never said why you are the one who’s advice should be followed. I know F all about pension legislation but there are a number on here who seem to know what they are talking about.

Who do we believe?

Wow that’s quite a rude response. I’m trying to be helpful! I don’t crop up every time there’s a pension question as I am not on the chat forum very often.

FWIW I’m not giving advice or saying I should “be followed”. I’m pointing out a few facts. Had it occurred to you that I may be qualified in this area?

My comments are based on what I've learned from trying to understand it and reading HMRC guidance. I'm not qualified in this area, so I apologise if I'm misleading anyone. I would be interested to know why I'm wrong!

Taking a pension as a lump sum is still crystallising benefits

So why is it called " Uncrystallised Funds Pension Lump Sum"?

Who do we believe? (I can't see how to quote)

Despite superstu being right, and the flurry of nearly right answers above, the real answer to this is to either look at the HMRC website - they have helpfully put the Pension Schemes Tax Manual online, but good luck with finding out what you need - or you could ask your provider, or you could pay someone who has spent time and money to get the appropriate qualifications to advise you. Someone above linked to a document on the Scottish Widows website, which will probably confirm what superstu said.

And it's called an UFPLS because it's taking funds cash from an uncrystallised fund.  The fact that it is a crystallization event is part of HMRC's secondary role to mess with our minds.

Fair question on the name which I think is stupid but presumably they named it that because you’re taking from funds not previously crystallised I.e not already designated to drawdown. It’s still a benefit crystallisation event and therefore takes up part of your lifetime allowance. The UFPLS was basically introduced to allow pension providers to offer some flexibility with respect to drawing benefits without having to rewrite their scheme rules and/or to offer a flexi access drawdown arrangement.

Thanks, superstu. I did know UFPLS counted for lifetime allowance, but I didn't write my post carefully enough and it read incorrectly. As you say, it's a stupid name, and it's only from your post that (I think) I've fully understood it. I posted the name so that other others could search for it to find out more.

pyranha, thanks for your reply, and explanation. I'm sorry to say that my experience of the financial services industry leads me to avoid professional advice in favour of doing my own research. I usually get the right outcome even if I don't get all the jargon right. I'm sure there are lots of honest and competent people working in the field, but the ones I've encountered have not been.

Wow that’s quite a rude response. I’m trying to be helpful!

We get that, thanks!

I’m pointing out a few facts.

So are others. Some are providing sources. The problem is, unless you have a claim to be an authority then noone knows why we should believe what you say versus what Joe Bloggs up there said.

Had it occurred to you that I may be qualified in this area?

Please do tell! Although we understand that you may not want to identify yourself too much and don't want to attract attention/questions/begging.

But you do understand why the nuance of who and what to believe on the internet is a difficult one? 🙂

Looks like this is put a stop to my latest money making idea !!!!!! Will have to work a bit longer.

Thanks all for explaining the ins and outs of this little problem.

Cheers