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Can the 25% tax free lump sum be paid into a different SIPP in one lump ?
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Andrew1952
Posted: 25 February 2024 19:24:24(UTC)
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I am going to convert my two Aviva personal pensions that I started in 1988 when
contracting-out started into an annuity before rates drop any more.

Hopefully I can buy one annuity with the combined 75% value of both funds
and ideally I would like to pay the 25% tax free lump sums into my SIPP with II,
but I don't know if the rules allow this.

I suspect the only way to do this would be to transfer both funds to II or somewhere
where I can open a SIPP and then deal with them there. Although, does this mean that
the only way to keep the tax-free lump sum inside a SIPP is to go into drawdown ?.

Is anyone familiar with HMRC rules regarding tax-free lump sums ?.
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1 user thanked Andrew1952 for this post.
Guest on 27/02/2024(UTC)
Hilda Ogden
Posted: 25 February 2024 19:27:10(UTC)
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Joined: 31/07/2023(UTC)
Posts: 892
Andrew1952;297400 wrote:
I am going to convert my two Aviva personal pensions that I started in 1988 when
contracting-out started into an annuity before rates drop any more.

Hopefully I can buy one annuity with the combined 75% value of both funds
and ideally I would like to pay the 25% tax free lump sums into my SIPP with II,
but I don't know if the rules allow this.

I suspect the only way to do this would be to transfer both funds to II or somewhere
where I can open a SIPP and then deal with them there. Although, does this mean that
the only way to keep the tax-free lump sum inside a SIPP is to go into drawdown ?.

Is anyone familiar with HMRC rules regarding tax-free lump sums ?.

All the big insurance companies have guidelines on how to comply with pension recycling legislation. I am sure Aviva have pdf documents about that. Or try a Google for pension recycling rules.
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Thrugelmir
Posted: 25 February 2024 20:05:35(UTC)
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2 users thanked Thrugelmir for this post.
Guest on 27/02/2024(UTC), LongJohn on 27/02/2024(UTC)
Busy doing nothing
Posted: 25 February 2024 20:11:41(UTC)
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Log in or register yourself on the MyAviva app, you will be able to view all your policies there, and all the relevant info you require should also be there as well.
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Guest on 27/02/2024(UTC), LongJohn on 27/02/2024(UTC)
SSJ
Posted: 25 February 2024 23:02:48(UTC)
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Andrew1952;297400 wrote:
I am going to convert my two Aviva personal pensions that I started in 1988 when
contracting-out started into an annuity before rates drop any more.

Hopefully I can buy one annuity with the combined 75% value of both funds
and ideally I would like to pay the 25% tax free lump sums into my SIPP with II,
but I don't know if the rules allow this.

I suspect the only way to do this would be to transfer both funds to II or somewhere
where I can open a SIPP and then deal with them there. Although, does this mean that
the only way to keep the tax-free lump sum inside a SIPP is to go into drawdown ?.

Is anyone familiar with HMRC rules regarding tax-free lump sums ?.

Are you're just trying to "defer" the 25% tax free lump sum by keeping and growing it in a tax-free DC pension/SIPP wrapper?
If so, you'll find that there is no "home" for a tax free lump sum other than your bank account - i.e. it can't stay in an uncrystallised pension pot and it can't move to a crystallised drawdown account. To defer the entire tax free lump sum, you would need to defer taking the entire pension.

If you take the 25% tax free lump sum and try to pay it into your SIPP then that will count as a fresh, tax-relievable pension contribution and will be subject to rules about earned income and rules about pension "recycling". I struggle to see how you could get around the recycling rules, and that's without even knowing your full circumstances!

Another factor in all of this is whether you are still working and contributing to a pension of any sort.
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5 users thanked SSJ for this post.
Tim D on 26/02/2024(UTC), Guest on 27/02/2024(UTC), COYS54 on 27/02/2024(UTC), LongJohn on 27/02/2024(UTC), Chalky W on 29/02/2024(UTC)
Tim D
Posted: 26 February 2024 00:57:06(UTC)
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Some info on tax-free-cash recycling and what HMRC look for at https://www.unbiased.co....-and-what-are-the-rules
(or in excruciating detail at https://www.gov.uk/hmrc-...ns-tax-manual/ptm133810 )

If the object is to retain some pension...

As SSJ notes above, if you take the 25% tax free cash and use the other 75% to buy an annuity... then you'll have no more pension assets (other than the annuity) without doing some recycling.

But an alternative approach might be:
- Leave 25% invested in personal pension/SIPP
- With the other 75%:
- buy an annuity with 75% of that (56.25% of total pot)
- with the other 25% (18.75% of total pot) take the tax free cash but buy a "purchased life annuity" (PLA) with it.
That'd seem to achieve the objective of converting 75% of the pot to annuity while leaving 25% growing in a pension wrapper. Note that the PLA element has a different tax treatment to a regular annuity... some of what it pays you as income is treated as a tax-free return of your capital.
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3 users thanked Tim D for this post.
SSJ on 26/02/2024(UTC), COYS54 on 27/02/2024(UTC), LongJohn on 27/02/2024(UTC)
HUFC
Posted: 29 February 2024 08:59:04(UTC)
#8

Joined: 20/05/2010(UTC)
Posts: 77
Does the opening poster have a spouse or partner to whom part of the PCLS can be gifted, & then make their own pension contributions & gain tax relief?
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Andrew1952
Posted: 29 February 2024 15:12:42(UTC)
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HUFC;297811 wrote:
Does the opening poster have a spouse or partner to whom part of the PCLS can be gifted, & then make their own pension contributions & gain tax relief?


No.

I am in that group that pays the most tax while getting the least
back in 'handouts'.
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