pension question

[bazza white]

Its a bit off for me but what's to stop you taking 25% of your pot at 55 tax and then reinvesting it to get the tax relief on top.

[The Leaper]

There's no tax to pay if you take 25% of the pot. The tax is at your marginal rate on any excess over 25%. At least that's how I think it works (early days!).

R.

[williaa68]

As I understand it once you start drawing down your pension there are restrictions on what you can then contribute into one so this wouldn't work. Shame though, it'd be great if it did!

[bazza white]

williaa68 said:

As I understand it once you start drawing down your pension there are restrictions on what you can then contribute into one so this wouldn't work. Shame though, it'd be great if it did!

Cheers this is the bit I didn't know.shame would be a instant 5% boost to the total pot.

[PositronicRay]

You can only take you're tax free ammount once, so you'd hardly be any better off.

[anonymous-user]

If you have multiple pensions I was thinking of taking 25% out of an old GPP & I could live in that for a couple of years. Make max contributions into current company scheme to get the tax relief. EG aim at taking 10k salary @ 0 tax & plough the rest into pension. Will need to look at the limits..

[PurpleMoonlight]

People are getting confused.

If you just draw the 25% pension commencement lump sum and no pension then your annual allowance is not restricted.

I'm sure there is something to try to stop the lump sum recycling, but as you cannot receive tax relief more than the tax you pay in a tax year it's probably pretty much self regulating.

[Simpo Two]

PurpleMoonlight said:

you cannot receive tax relief more than the tax you pay in a tax year

I thought that Mr Osborne just added 20% to whatever you paid in...?

Or are you saying that if one doesn't pay income tax, there's no point in having a pension?

[PurpleMoonlight]

Simpo Two said:

I thought that Mr Osborne just added 20% to whatever you paid in...?

Or are you saying that if one doesn't pay income tax, there's no point in having a pension?

If you pay no tax then you can contribute to the diminimus level and receive a tax credit where you have not paid the tax in the first place. The diminimus is £2880 net.