I'd be interested in any opinions on the following...
I'm able to take benefits from a DC pension this year - but I'm still working and a higher rate taxpayer. I'm looking to make full use of ISA and pension contribution allowances but this will leave it a bit tight cash-wise for any more VCT contributions this year.
Would it make sense (assuming that VCTs are still worthwhile investments this year) to crystallize a portion of my DC pension pot and use the PCLS to make cash available for more purchases?
Or have I missed something obvious?
Thanks,
P
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Pension PCLS to fund VCTs (Still employed)
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- 2 Lemon pips
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Re: Pension PCLS to fund VCTs (Still employed)
Hard to say the right solution for you without further detail. What I can tell you, as someone with a pension in drawdown, with a fixed lifetime allowance, which I currently exceed, is that I draw down some funds each year and recycle them into VCTs. I am an additional rate tax payer, so there is a net 15% tax hit in doing that, but I am moving funds into a tax free environment, rather than increasing tax on the pension drawdown amounts if I did nothing. Every situation will be different.
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Re: Pension PCLS to fund VCTs (Still employed)
For some years I used cash savings towards sufficient VCT purchases to (more-or-less) eliminate my tax burden - after putting any 40% income into a SIPP and using the ISA allowance.
If what you're contemplating is a cash buffer with which to do something similar, then from a purely tax point of view it seems to make a lot of sense. But that of course comes with caveats about a tax tail wagging an investment dog.
If what you're contemplating is a cash buffer with which to do something similar, then from a purely tax point of view it seems to make a lot of sense. But that of course comes with caveats about a tax tail wagging an investment dog.
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Re: Pension PCLS to fund VCTs (Still employed)
Thanks for your thoughts James and UncleE.
For now I was just looking at options. I'm getting close-ish to the Life-time Allowance (although continuing to pay in for now) so there could be an advantage in crystallizing a proportion to remove the tax free cash from making any further growth inside the pension?
In any case, what I'm proposing seems to be valid, though whether it's sensible for me I'll need to think a bit more about.
It's all a bit of a juggling act...
For now I was just looking at options. I'm getting close-ish to the Life-time Allowance (although continuing to pay in for now) so there could be an advantage in crystallizing a proportion to remove the tax free cash from making any further growth inside the pension?
In any case, what I'm proposing seems to be valid, though whether it's sensible for me I'll need to think a bit more about.
It's all a bit of a juggling act...
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