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Where Taxpayers and Advisers Meet

Multiple / Successive Pension Commencement Lump Sums ?

EF101
Posts:27
Joined:Fri Oct 30, 2015 12:26 am
Multiple / Successive Pension Commencement Lump Sums ?

Postby EF101 » Thu Feb 25, 2016 11:33 am

I have just opted to take the 25% tax free lump sum from the current balance in my SIPP. If I understand correctly this does not (as things stand today) limit my ability to carry on making contributions of £40k per year (I have not yet reached my lifetime allowance).

My question is whether it is then possible to take one or more further 25% tax free lump sums at a future point in time (or even in successive years) if I carry on making payments into the SIPP, but have not made any other drawdowns from the SIPP. I would add that the 25% drawdowns would NOT be used for the purpose of funding the future SIPP contributions, as I know that this is an issue.

Puzzled52
Posts:7
Joined:Wed Aug 06, 2008 4:07 pm

Re: Multiple / Successive Pension Commencement Lump Sums ?

Postby Puzzled52 » Tue Mar 08, 2016 6:35 pm

If you have only taken the 25% tax free lump sumthen providing you have sufficient income you retain the £40000 annual allowance.
The remaining 75% becomes crystallised.

Any new contribution will be regarded as uncrystallised and thus will have 25% tax free cash available. This is of course based on current rules.

LozaACCS
Posts:1504
Joined:Wed Aug 06, 2008 3:55 pm

Re: Multiple / Successive Pension Commencement Lump Sums ?

Postby LozaACCS » Tue Mar 08, 2016 10:04 pm

You are not going to trigger a LA charge by only taking the 25% PCLS, but if you go into drawdown or annuitise the fund you may well do.
Bear in mind that each encashment is a benefit crystallisation event and uses up some of the LA, where the LA is reducing year on year then this could come back and bite, I think many people in defined benefit (final salary) schemes could have a rude awakening, I suppose the shock is less when the scheme administrator can be made to pay it but nontheless people who have sacrificed present income believing it to be tax relieved savings may be somewhat deluded.

strawn
Posts:96
Joined:Fri Jun 01, 2012 10:11 am

Re: Multiple / Successive Pension Commencement Lump Sums ?

Postby strawn » Wed May 25, 2016 3:31 pm

Just be careful of the recycling rules that constrain pension contributions made after taking a PCLS.


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