Is that pension recycling?

[nickfrog]

I obviously don't want to recycle as per HMRC's guidelines.

My wife and I are 52 and freshly retired ; we will start drawing down at 55. We are contributing £2,880 per year each to trigger an uplift to £3,600 each until at least 55.

Can we carry on doing this for the foreseeable future once we have started drawing down post 55 and still be compliant? (if the facility still exists of course!).

PS we will stay just below the income tax threshold as we will complement with ISA wrapped facility.

[Mr Pointy]

It's what I'm doing but I pay into my pension out of a GIA so it looks like separate pots of money. You might want to ask Nik over on the IM Pension sticky.

[phope]

Sounds like you will be within the Money Purchase Annual Allowance limits

https://www.moneyhelper.org.uk/en/pensions-and-ret...

[nickfrog]

Thx both. I think we will be OK because of the pattern of contributions prior to taking tax free money. It won't be increasing once we have started drawing down.

I just came accross this on the H&L site.

WHEN COULD YOU BE AFFECTED?
You could incur a tax charge if ALL all of the following happen:
• you take tax-free cash from a pension,
• as a result of taking tax-free cash, the contributions paid into a
pension are significantly greater than they would otherwise have
been (see ‘What counts as a significant increase?’ below),
• the recycling was pre-planned (HMRC will consider each case
and any evidence which points to preplanning),
• the amount of tax-free cash you take, together with any tax-free
cash taken in the previous 12 months, exceeds £7,500 and;
• the cumulative amount of the additional contributions exceeds
30% of the tax-free cash (see example 2).

[Jules Sunley]

You're fine, basically the rules are that if you were already able to afford contributions before taking the tax-free cash (and even better were actually making them) then your affordability is not based on needing the new tax-free cash and hence this is not recycling. The rules were designed to avoid a sort of 'Russian Doll' scenario where you invest 25% of 25% of 25% through money in then out then in then out etc etc.