Pension - too good to be true?

[Jaguar steve]

In conversation with my pension provider I half jokingly said it's a pity I can't draw more income out than I need every month and then pay the surplus back in to get 20% tax relief added onto my repayments.

They said sure you can and the paperwork to do exactly that arrived this morning.

Where's the catch?

[anonymous-user]

Are you not paying tax on the pension though?

[Mazinbrum]

Depends if any of the six recycling rules apply to you
https://www.pruadviser.co.uk/knowledge-literature/...

[PistonHead007]

Mazinbrum said:

Depends if all of the six recycling rules apply to you

Fixed that for you.

Assuming you have no relevant UK earnings any more you can only pay in £3,600 gross per annum. If you are a basic rate taxpayer then to extract £2,880 you'd have used up £3,600 of your pot. That's then grossed back up to £3,600 and when encashed gives you £3,060 (25% tax free and 75% basic rate taxed). Congratulations you've earned yourself £180. Bit of a pain in the arse to do but some small benefit.

Edited by PistonHead007 on Friday 18th February 13:45