Lump sum recycling in pensions - using your PCLS for a pension contribution

Lump sum recycling is when you take your tax-free pension commencement lump sum (your PCLS - sometimes just known as tax-free cash) and then pay it back into a pension as a new contribution.
The purpose is to claim the tax-relief that any pension contribution would get. But this means that you would be getting tax relief on funds that had already benefitted from tax relief in the past.
Some people call this ‘double-dipping’.
The recycling rule aims to prevent this kind of exploitation of the tax rules.
In this video I explain the checklist of what constitutes lump sum recycling and what is allowed.
The Money Purchase Annual Allowance explained: • The MPAA (Money Purcha...
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[@TheRetirementCafe]

Have you considered this approach?

[@SimonHutson]

Hi Justin, thanks for producing so much great content. I'll be 55 next year; planning to retire at 60; currently receive 47% tax relief on my DC workplace pension contributions via salary sacrifice; adjusted income is less than £260k; currently contribute £45k a year. I am considering taking £7,500 PCLS each year between 55 & 60 and increase salary sacrifice contributions by £14k. Aside from the loss of £37,500 of PCLS lifetime allowance, are there any other considerations I need to take into account? Many thanks, Simon.

[@curiousjoe395]

Nice video. Does recycling also apply when I receive tax relief through my tax return and then reinvest this into my pension to go through the tax relief loop again? i.e. getting tax relief on money that has already had tax relief.

[@mark-se6ef]

is there not a 4k recycle rule? limiting you to that amount per annum.

[@PaulDurbin1969]

Would a PCLS transferred to a spouse and paid into their SIPP be classed as recycling?

[@TheRetirementCafe]

That should be fine Paul. You are not giving your spouse a PCLS, you are giving cash. If they then pay cash into their SIPP and that is within the rules no problem.

[@PaulDurbin1969]

@@TheRetirementCafe Thanks Justin, my aim is to try an balance our pension pots so we can drawdown both and keep tax to a minimum.

[@jasonmitchell866]

Hi, I'm wondering if you could make a further video, expanding on this topic. Specifically, once in full retirement, how much of my DB pension income ( both annual and lump sum ) can I reinvest into my UNTOUCHED sipp? I'm unsure as to whether this would be limited to £3600 including basic tax relief, or the prevailing pension annual allowance at the time. I.e. £60k. I'd be grateful if you could provide some clarity. Kind regards Jason

[@TheRetirementCafe]

Hi Jason. You need earnings to contribute above the £3600.

[@stephenkelly3431]

Hello, anyone help?. When hmrc consider if you have significantly increased pension contributions, for the purpose of recycling is the assessment against the total of all contributions ( employer +personal) over all pensions(DC and dB) for each of the 5 years (2 before, the tax year possible pcls invested and 2 years after)?

[@malvanlondon8683]

Can you put your PCLS into an ISA?

[@TheRetirementCafe]

You can put up to the ISA limit of £20k per year.