Pension Advice on tax-free lump sum.

[MyGazeboisLeaking]

Hi all,

I am moving jobs shortly and when the time is right I'll be taking professional advice on potentially combining pension pots and other elements.

In the short term, I can't seem to find a straightforward answer to a question I have about lump sums.

I'm 53 and as per current pension plan, can take 25% of pension pot as a tax free lump sum in 2 years time when I'm 55.

That's fine and I'm considering that to reduce down mortgage, but what I can't tell is if I can still contribute to that pension pot in the same way after, or has it been 'activated' and therefore subject to different rules and limits.

I will get formal advice on this but was wondering if anyone on MN has experienced same situation and can give me an early answer?

I think that as long as you only take the PCLS and do not start taking income or UFPLS, you can keep contributing as usual and wont be subject to the reduced MPAA. I'm sure someone more experienced can confirm though!

Thanks, @TheNextChapter .

That's what I'm hoping but can't find it clearly stated.

*clearly stated in ways that my limited knowledge can understand!!!!

Best to check directly with the scheme administrators, but if it is a defined contribution scheme then yes, you should be able to do that.

What happens is that you 'crystallise' the whole pension fund, have 25% paid directly to you as tax free cash and leave 75% still invested but available to you in drawdown. Any new contributions you then make will accrue on the 'uncrystallised' side.

If you don't need as large a sum of tax free cash as the whole pot would give you then you can just crystallise a smaller amount, leaving the uncrystallised pot to grow for a bit longer.

Thank you @Sunseed, that's great.

My requirement is to be able to take the 25% tax free lump sum at 55, and to then still be able to contribute up to £40k per annum (hmmm - up to being the key word!) so I can continue to build the pot until I really need the income.

There is a Pensions talk forum on Money Saving Expert- they have lots of knowledge able posters there.

Thanks @Lightsabre .

I'll give that a go too.

Yes that fine. You won't have triggered what's called the MPAA - money purchase annual allowance. You can google triggers & implications of that to understand more.