Who will be caught by the new recycling rules?
The government has no desire to affect an individual’s “normal retirement planning”, but is concerned about individuals who pre-plan the use of the lump sum to increase their pension benefits. Such pre-planned measures which would be caught by the recycling rule include: • Any member who makes a significant increase in contributions to a pension scheme in the two tax years leading up to retirement and the tax year of retirement itself. • members who plan to use their retirement lump sum from the Teachers’ Pension Scheme or any other pension scheme with the intention (prior to its receipt) of investing the lump sum into another pension scheme; or • the use of savings or a loan to fund additional pension benefits prior to retirement, with the intention of using the lump sum to replenish available savings or repay the loan when the retirement lump sum is received. (Please see 3.9.2 of the draft HMRC Guidance Note). Please note this will also apply if the member is planning higher payments
