PCLS Recycling Question

irosie1

I'd be interested in people's thoughts on a potential PCLS recycling scenario.

A client is approaching retirement and has surplus cash available that they can contribute to their pension. This is effectively their last opportunity to make a significant contribution while they have sufficient relevant earnings, so the rationale is that this forms part of their normal retirement planning.

The client then retires and naturally starts drawing on their pension to meet their retirement expenditure, with some of those withdrawals being taken as PCLS.

The figures involved mean all of the monetary tests are failed.

My concern is whether there could still be an indirect recycling argument. The cash used to make the pension contribution could otherwise have been retained and used to meet expenditure in retirement. Because it has instead been contributed to the pension, the client is subsequently drawing on their pension, including PCLS, to meet that expenditure.

So, where do you draw the line between normal retirement planning and PCLS indirectly enabling an increased pension contribution?

Would you be comfortable that the contribution is genuinely being made for retirement-planning purposes, with the subsequent PCLS simply forming part of the client's normal retirement withdrawals? Or would you be concerned that the fact the original cash could otherwise have funded that expenditure creates a sufficient link for the recycling rules?

I'd be particularly interested in anyone's experience of similar cases or any technical/compliance views on how the "direct or indirect" element should be interpreted in these circumstances.