Income Recycling Calculator

Show your clients how to get two Pension Commencement Lump Sums

Pension's legislation offers a great degree of flexibility in retirement planning. An example of this is the ability for your clients to 'recycle' the income from their Income Drawdown plan back into their Personal Pension plan, instead of taking their pension commencement lump sum and nil income. This gives the following benefits:

• Allows a second Pension Commencement Lump Sum
  The income that is taken from the drawdown plan is re-invested back into your client's Personal Pension plan. Your client would continue to benefit from tax efficient growth and would have access to a further pension commencement lump sum at the point they take benefits from the plan.
• Maximising Death benefits
  If your client chooses to take their pension commencement lump sum with nil income, the fund that remains would be liable to a 55% tax charge on death. However if the client takes the maximum available income from the drawdown plan and recycles the income back into a personal pension pot, the fund accrued by the reinvested income payments would not be liable to the same tax charge on death.

Whilst income payments from Income Drawdown are treated as taxable income, this can be offset by the tax relief given when the payment is re-invested into the personal pension. It is worth noting that the HMRC do not classify income from Drawdown plans as Relevant Earnings.

Here is the link to the main rules covering contributions and tax relief on the HMRC website.

Our Flexible Retirement Plan can be used to allow your clients to recycle their income and to continue to potentially benefit from reduced charges due to fund size and loyalty discounts under FRP.

The Income Recycling Calculator has been developed to show the impact of Income Recycling if this option is taken.

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