Pension recycling rules

[teecee90]

I have a deferred pension from a former employer that I intend to start drawing early next year, including a 25% lump sum.

I intend to continue working part time for my current employer where I am paying into the local government pension scheme at the specified rate. I also pay additional voluntary contributions (AVC), which I intend to increase next year to keep my total income below the higher tax threshold. All ongoing pension payments will be funded by deductions from my salary.

Is there any significant risk of triggering the recycling rules?

TIA

[argoal]

Unless someone. corrects me, you can increase your contributions up to 30% of the tax free lump sum, spread over three years, without triggering recycling restrictions.

So if the lump sum is £100K, them you could increase your pension contributions by £10K/year for the next three years - up to the 40K annual allowance.

If you have taken any pension other than the tax free lump sum then the annual allowance drops to 4K. I assume that this is not the case for you.

[BrummieDave]

If you have taken any pension other than the tax free lump sum then the annual allowance drops to 4K. I assume that this is not the case for you.

Not correcting you argoal, but clarifying your above statement. The Money Purchase Annual Allowance (MPAA) only drops to £4k if you access a defined contribution pension flexibly.

My point being that the OP states an intention to draw a deferred pension including a 25% lump sum, but does not state if this is a deferred DC or DB pension. If the OP or anyone else is drawing any number of defined benefit/final salary pensions, this does not trigger the MPAA of £4k. It is only triggered by flexibly accessing a DC pension.

I have found this distinction between DC and DB pensions and their significance to the the MPAA to be not as widely understood as it could be. Hence this clarification.

[teecee90]

Thanks for the replies so far.

Just to clarify. I currently have 3 pensions; two defined benefit and one defined contribution.

The defined contribution pension is a very small pot, about £20k, which I intend to withdraw in full next month to finance a car purchase. So I will get 25% of that tax free with the remainder taxed.

The substantive pension that I intend to draw early next year is a defined benefit public sector final salary pension, that I intend to take the maximum 25% lump sum of around £150k together with an RPI linked annual pension for life of approximately £21k.

I will continue to work part time in my current job in local government, which is a defined benefit average salary scheme where I pay 6.8% of my salary. I am also currently paying £150 pm AVC which I intend to double to £300 per month from next year until I retire fully in about 5 years time.