Quick crystallisation question.

[DrFfybes]

A hypothetical one here.......

An individual earning £65k and intending to stop work... They have several old occupational DC pensions with different providers.

Can they put £12k into a newly opened SIPP in March, wait until the tax is added to take it to £20k, and in May take the whole lot out, getting £5k as a TFLS and just paying tax on the £2430 over the personal allowance, so getting circa £19.5k back into the bank?

If so, can they then take TFLS from their other pensions, or does the TFLS apply across all the pots amalgamated?

Thanks

Paul

[swill453]

Can they put £12k into a newly opened SIPP in March, wait until the tax is added to take it to £20k

Only basic rate relief is added, taking it to £15k. Higher rate relief has to be reclaimed.

Yes you can take it all out, but don't forget that will limit any further contributions to all pensions to £4k per year (the MPAA).

If so, can they then take TFLS from their other pensions, or does the TFLS apply across all the pots amalgamated?

Not sure I understand the question, you can take 25% tax free from each of the DC pensions after you reach age 55.

Scott.

[DrFfybes]

Can they put £12k into a newly opened SIPP in March, wait until the tax is added to take it to £20k

Only basic rate relief is added, taking it to £15k. Higher rate relief has to be reclaimed.

Yes you can take it all out, but don't forget that will limit any further contributions to all pensions to £4k per year (the MPAA).

Thanks - last year of working (age 64) so not an issue. Forgot about the reclaiming the other 20%, never had to worry about higher rate tax

If so, can they then take TFLS from their other pensions, or does the TFLS apply across all the pots amalgamated?

Not sure I understand the question, you can take 25% tax free from each of the DC pensions after you reach age 55.

What I meant was if you already had say £200k in a SIPP with Iweb, and opened and then closed a HL one with the £12k (just to keep things neat and tidy for the purpose of example), would this be treated standalone or would they say the entire HL one was within the 25% TFLS of the total of all the pensions, or are they completely seperate identities.

Paul

[swill453]

What I meant was if you already had say £200k in a SIPP with Iweb, and opened and then closed a HL one with the £12k (just to keep things neat and tidy for the purpose of example), would this be treated standalone or would they say the entire HL one was within the 25% TFLS of the total of all the pensions, or are they completely seperate identities.

You'll only be able to take 25% tax-free from each individual pension. Sorry but I still don't follow what you mean by "would they say the entire HL one was within the 25% TFLS of the total of all the pensions".

Scott.

[DrFfybes]

Sorry but I still don't follow what you mean by "would they say the entire HL one was within the 25% TFLS of the total of all the pensions".

Scott.

I wasn't sure whether the individual pensions were treated as one large one and amalgamated, as they are for the LTA. Looking at the crystallisation mechanics thread, it appears you can part crystallise a fund, so separate funds are separate

In this scenario MrX would open a separate SIPP rather than add extra money to an existing workplace pension.

If they are completely seperate entities, then for a £16k input it would get £4k tax relief added up to £20k. Take £5k back tax free and £15k taxed, meaning £480 paid and circa £19.5k in the pocket assuming no other income next year.

If pensions were considered as amalgamated, even across different providers, then the entire £20k drawn would be considered as part of the 25% of the amalgamated pots, thus paying zero tax but losing the benefit of the £12570 personal allowance.

His other DC funds are currently with companies like AVIVA, L&G rather than SIPPs so this flexibilty is not easily available.

Thanks

Paul