Pension drawdown and new pension question

[sugerbear]

I have a defined contribution that I intend to draw the 25% tax free element off in the next few years (pension will NOT go into drawdown I just want the tax free money element) , that still leaves me with about five to ten years to carry on contributing to that pension when I can then retire.

the question is can I take out a separate private pension (with Vanguard for example) after I have taken the first 25% tax fee from the other pension and contribute to that for five years and then take 25% tax free from that pot? While I am contributing I will be working.

So pension 1 at company - hit 55 / take 25% tax free and carry on contributing (this is a DC work pension)
Then setup pension 2 at Vanguard - age 55 and 1 month and contribute to that for five years and take 25% of that pension tax free when I reach 60
And I intend to carry on working fulll time until 60

Is that possible? (my combined pension contributions will not be more than 40k per year)

[otherman]

You can have mulitple DC pensions and each one has its own 25% tax free allowance. So yes.

[sugerbear]

otherman said:

You can have mulitple DC pensions and each one has its own 25% tax free allowance. So yes.

Thank you

[IJWS15]

IIRC if you take more than a certain value from a DC pension you severely limit what you can contribute with the tax benefit into ANY pension from that point onwards.

I haven’t taken anything from my dc pot yet for this very reason.

[PistonHead007]

sugerbear said:

I have a defined contribution that I intend to draw the 25% tax free element off in the next few years (pension will NOT go into drawdown I just want the tax free money element)

It will go into drawdown, you just won't draw anything from the drawdown account. That pot will become crystallised and you have to do something with the other 75%, which in your case means putting it into a drawdown account.

You can setup another pension and pay into that in the usual way.

Only drawing tax free cash does not trigger the Money Purchase Annual Allowance, which is what the poster above refers to. The MPAA permanently reduces your annual allowance from £60k to £10k and would come into play if you take even a penny from the drawdown account, which you said you aren't going to do.

[PM3]

25% ...up to a TOTAL limit of £268,275

[sugerbear]

I have had a slight change of thought after having seen the pension that has been offered by my DB pension 55vs60 there isnt a great deal in it, Intention would be to full retire at 57 or 58.

So my plan is to start drawing on my pension in 2025 so my income for 2025 / 2026 would be 60k from taxable work income and 20k from the DC pension. I realise that the 10,000 pension limit applies BUT (and this is the question i am asking) could I use my unused pension contributions from the past three years to dump say 40k into my work DC pension for three years. There are both benefits in tax and work pension contributions for me.

I am making a big assumption that the 10k pension limit after drawdown doesn't affect my ability to use up my allowance from the previous three years?

[PistonHead007]

The MPAA £10k limit doesn't apply if all you've done is draw tax free cash and/or start taking a final salary scheme.

[sugerbear]

PistonHead007 said:

The MPAA £10k limit doesn't apply if all you've done is draw tax free cash and/or start taking a final salary scheme.

Thanks, I was just coming back to this thread as there appears to be mixed messaging around the MPAA on some websites (or rather a lack of clarity) but as you have said I can start to take the DB pension without triggering the MPAA limit. Intention was to finish work at 58 but I may as well continue to work for as long as I can and dump as much into my pension whilst I still can.