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. It does so by providing for contributions to be measured over a set period of time in determining whether or not there has been a significant increase in contributions.

The period of time 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.