fabs,
It isn't a dumb question at all. Individual Protection, as we know it, has been around for a while. It will be rolled out again, when/if the lifetime allowance drops further. If your wife hasn't considered and/or taken out fixed protection, she has not long at all to make her mind up - pretty unrealistic now to be objective - given the consequences of getting it wrong.
One aspect though of planning in an abstract sense and being purely contingent in a theoretical sense, is that if she (forgive me!) divorces you and if there is a pension debit order made against her 'pot', her allowance resets. If she has a pension in existence already in this tax year, she can retrospectively refer to it and top up an unused annual allowance if she wanted to get her retirement saving back on track.
But.. make sure she takes proper regulated advice about this. The consequences of getting it wrong could be in the order of tens of thousands of pounds.
LJ,
Sorry, my file was growing nicely and then the budget impacted with end of year stuff. The devil is in the detail - that's the bottom line. You can use it if you use it taking into account other rules and guidance. Recycling guidance wasn't devised to trap the unwary, just the unscrupulous. In HMRC’s words, there must be ‘a conscious decision’ and the onus is on HMRC to prove a pre-planned intent to recycle. But guidance exists to help you too, and as long as you play within the rules, you should be ok.
There are lots of relatively simple, straightforward and legitimate ways you can increase the levels of contributions into a personal pension following receipt of EDP/PCLS(tax free cash from a pension). They have to be done diligently and taking into account guidance (see below). If you are clumsy, unsubtle and inarticulate about it, and that isn't a metaphor for encouraging weasely deceit, then expect the sound of outraged HMRC Omegas on gravel at 0230.
However, if you have a plan in place that is thoughtfully considered and well documented, if you are diligent, law abiding and acquiescent enough to accept that the rules are fair and exist to help and protect, you should have nothing to worry about - if your contributions increase after taking a PCLS/EDP. After the budget, it is now even more consistent with GO's declared modern principles of a flexible approach to pension saving and retirement.
However, for the avoidance of doubt and for peace of mind, always take personal and regulated advice that you trust, and this is chapter and verse on recycling. Bear in mind too, that as part of growing your retirement income, if you want to subsequently refer to a year's unused pension allowance, you have to have a pension established in that tax year. It might be that you set one up with a small payment - but you'll have at least done it.
I'm acutely aware of not stepping over the line into offering advice so I offer that as generic, non specific information. Sorry for being opaque and I sense you have one eye on the calendar. Message me and I can probably help you a little more. I'm working this weekend and my number can be found indirectly elsewhere in this thread.
RPSM04104900 - Technical Pages: Taxation: Unauthorised Payments: Recycling of pension commencement lump sums: Contents