RPSM04104950 - Technical Pages: Taxation: Unauthorised Payments: Recycling of pension commencement lump sums: Cumulative basis

What is the cumulative basis on which the significant increase of contributions is based?

An individual planning to increase contributions significantly to a registered pension scheme when taking a pension commencement lump sum does not avoid the “significant increase” test by increasing contributions piecemeal or gradually over time.

The period of time over which contributions are measured to determine whether or not there has been a significant increase in contributions is:

• the tax year in which an individual takes a pension commencement lump sum with the intention of using it to make significantly increased contributions to a registered pension scheme
• the 2 tax years immediately preceding the tax year in which the individual took the lump sum, and
• the 2 tax years immediately following the tax year in which the individual took the lump sum.