Contributing £2,880 to SIPP after receiving 25% PCSE

[bots33]

Hi all,

Just taken my 25% lump sum and want to check whether I'd fall foul of recycling rules on making a SIPP contribution of £2,880 this year. Haven't made any personal contributions for 5 years and had £10k of savings prior to receiving the lump sum. Reviewing the 6 conditions, I think I'm OK since don't meet #6 but appreciate any feedback on whether I've interpreted these conditions correctly, particularly around #2 & #4.
1. the individual receives a pension commencement lump sum - YES
2. because of the lump sum, the amount of contributions paid in respect of the individual is significantly greater than it otherwise would be. (Don't Know - Is £2.88k contribution seen as significantly greater if I haven't made any contributions for 5 years?)
3. the additional contributions are made by the individual or by someone else, such as an employer - YES, as an individual
4. the recycling was pre-planned - what does this even mean? How do I prove it wasn't (or is the burden of proof on HMRC?)
5. the amount of the pension commencement lump sum, added to any other PCLS received in the previous 12 month period, exceeds:
– £7,500 for events on or after 6 April 2015, YES or
– 1% of the standard lifetime allowance for events before 6 April 2015 - YES
6. the cumulative amount of the additional contributions exceeds 30% of the pension commencement lump sum. - no, it would take 10 years of contributing £2.88k to get to this amount)

I'll receive interest income of £3k a year so can this be applied to an annual SIPP contribution going forward, without reference to these recycling rules?

Thanks for any replies.

[Alaric]

I'll receive interest income of £3k a year so can this be applied to an annual SIPP contribution going forward, without reference to these recycling rules?

There doesn't seem to be evidence that HMRC take any interest in those with both a PCLS and the £ 2880 contribution in the same tax year. If necessary, you can simply regard the £ 2880 as "paid for" by your interest income and disconnected from the PCLS.

[pochisoldi]

The anti recycling rules drop the annual allowance down to £4k (gross),
If the only contribution is £2880 net (=£3600 gross), there will never be an issue.

Moderator Message:
The poster of this message has told us that the information in this post is incorrect, and has posted a correction further down the thread - Chris

[Tedx]

I believe that the final test is that HMRC have to 'prove that tax free cash recycling was the intention from the outset'

[pochisoldi]

My previous post was incorrect- I conflated the MPAA ("£4k") with the pension recycling rules, where no such conflation exists. (i.e. you can still

The "no need to investigate further limit" is not the money going in, but the tax free lump sums paid out.
If the tax free lump sum (plus any other tax free lump sums taken over the last 12 months) is less than £7500, then no further investigation is required.

I would still argue that in most cases paying £2880 into a pension isn't going to trigger an investigation, but care is still needed.

[bots33]

Thanks all for your replies. My concern was around who has to prove intent - I only decided to put the £2.88k after I received my PCSE, to take advantage of the tax relief, and have savings that cover that amount anyhow (outside of the PCSE). It would have been much simpler for HMRC to say you can only make pension contributions to a certain cap in the year, and 2 years following, receipt of PCSE (e.g. £4k / 10k etc.), and then get back to whatever the standard limit is in the 4th year.