Lifetime Alowance

windbird

Can anyone tell me what this is? I recently tried to cash in a pension plan to help toward my mortgage deposit. But was told that I can only have 25% of the fund as it exceeds my lifetime allowance!!! Are there calculations for this?

MrChips

This sounds slightly confused to me - I think either you have misunderstood what you have been told, or whoever told you this was wrong! The Lifetime Allowance is the maximum value of pension benefits which can be accumulated while still retaining maximum tax relief. It is currently £1.75m. If your fund did exceed this amount, you would actually be able to take all of the excess over the Lifetime Allowance as a lump sum at retirement, less tax at a rate of 55%.

As you are looking to build up a mortgage deposit, I am guessing you are below age 50? In which case, you won't yet be allowed to start receiving any pension benefits you have accrued. When you are old enough to start claiming your pension (from age 55 based on current legislation), you will be able to take up to 25% as a tax free lump sum.

ManAtHome

Sounds like you could be over 50 if they've said you can have 25%. You can get it all if it's a 'trivial pension' (total funds in all pensions less than £15k I think), but if more than that you're generally stuck to the 25% (tax free), then either an annuity or drawdown for the other 75%.

Maybe it's the wording 'trivial' v 'lifetime'..?

dunstonh

I reckon it means exceeds 1% of the lifetime allowance and therefore triviality is not an option. Therefore the pension cannot be "cashed in".