Crystallisation, RBCE's & PCLS

Question 1

What is ‘Crystallisation’?

Answer 1

Name given for accessing benefits.

Question 2

What is an RBCE?

Answer 2

RBCE stands for “relevant benefit crystallisation event”. It’s a term used in the UK to describe when a tax-free lump sum is paid from a pension.

Question 3

What is a ‘PCLS’?

Answer 3

A Pension Commencement Lump Sum (PCLS) is a tax-free lump sum that you can withdraw from your pension when you start taking your retirement benefits.

Question 4

What is ‘Recycling’?

Answer 4

Pension Recycling is where an individual boosts their pension savings by taking their tax-free cash and as a result increases their contributions into one or more pension plans to gain more tax relief.

Question 5

True or False.

‘Recycling’ could be treated as ab ‘Unauthorised payment’?

Answer 5

True.

Question 6

What are the triggers for ‘Recycling’?

Answer 6

* Only if Lump sums received are more than £7,500
* Extra contributions must exceed 30% of total lump sums
* Extra contributions must be at least 30% greater than would have been

HMRC would then need to determine if this was pre-planned.

Question 7

Would this scenario trigger ‘Recycling’?

• £50,000 PCLS (Tax Free Cash)
• £10,000 Put back into a pension
• £2,000 is average annual contribution

Answer 7

No. Rule 2 has not been triggered.

Rule 2: Extra contributions must exceed 30% of total lump sums

30% of £50,000 = £15,000 (Under £10,000 contributed)

Question 8

Would this scenario trigger ‘Recycling’?

• £50,000 PCLS (Tax Free Cash)
• £25,000 Put back into a pension
• £5,000 is average annual contribution

Answer 8

Yes.

**All triggers have been met - it would then be up to HMRC to determine if this was pre-planned.