Pensions - seeking advice

[Howard1650]

I'm currently 55 years old and considering activating my Pension Protection Fund (PPF) pension, which is a final salary defined benefit scheme. This scheme offers a 25% lump sum payment and subsequent monthly income.

I understand that activating this pension early (at 55 instead of 65) will result in a slight reduction in the overall value of the scheme. However, I am interested in accessing the lump sum and monthly income to help reduce my current debt.

My current workplace pension allows me to contribute £15,600 tax-free per year, but I am considering increasing this contribution to £30,000 if I activate my PPF pension. (clearing dedt and additional income would allow this) I plan to continue working until age 60.

I have read there is a £10,000 annual pension contribution limit if you have activated a "pension scheme." However, I am unsure if this limit applies to schemes held by the PPF, and specifically to defined benefit schemes.

Could you please provide clarification on the following:

- Does the £10,000 annual pension contribution limit apply to PPF-held defined benefit schemes?
- If so, how would this limit affect my ability to increase my workplace pension contributions to £40,000 after activating my PPF pension?

Any advice you can offer on this matter would be greatly appreciated.

[Rufus Stone]

It's called the Money Purchase Annual Allowance and no, defined benefit pensions do not trigger it.

[BenB91]

The MPAA (Money purchase annual allowance) does not apply to Defined Benefit schemes, which the PPF is, therefore you can claim the PPF and still contribute more than £10k p.a. into your personal pension.

https://www.mandg.com/wealth/adviser-services/tech...

[leef44]

However, if you access your pension and increase your annual pension contributions, this can be considered as recycling pension funds. Best to consult a tax accountant on this otherwise HMRC might tax you for the increased contributions.

[Howard1650]

The increase in work place pension will come from my PAYE salary. I would increase the percentage I pay in directly before tax.

[Panamax]

Howard1650 said:

activating this pension early (at 55 instead of 65) will result in a slight reduction in the overall value

Are you sure about that word "slight"? It's more likely to be "hefty".

[SunsetZed]

Panamax said:

Howard1650 said:

activating this pension early (at 55 instead of 65) will result in a slight reduction in the overall value

Are you sure about that word "slight"? It's more likely to be "hefty".

I'm not sure about the hefty for the overall value, it depends on how long the OP lives! It will likely result in a hefty difference per annum but the break even point may well be around 80 so the OP may 'win' or 'lose' depending on how long they're in receipt of the pension.

[mikeiow]

Panamax said:

Howard1650 said:

activating this pension early (at 55 instead of 65) will result in a slight reduction in the overall value

Are you sure about that word "slight"? It's more likely to be "hefty".

My thoughts too.

I would suggest asking the scheme administrators for a projected value if you let it run to “term” (check - is it 65? It might be 60?), versus what you would get if you took it now.

Then get busy with the spreadsheet….

Oh, & everything you get here is ‘guidance’, not ‘advice’.
Advice means it is regulated , which you will only get from a FA (Financial Advisor). If you do go down that route - & I doubt whether you need it - be sure to find an IFA - the I means Independent