What are good strategies folr avoiding the LTA limit

fizio

Just wondering what people who are expecting to hit the LTA limit are doing about it?
I have around a million in mine currently (mix of defined benefits and defined contributions) and with upto 10 years to go and making use of AVC's, I'm in danger of getting to 1.25m in the next few years.
Given there are many variables (eg retirement age, fund growth etc) and the fact that a mandatory 15% salary will continue to go into my fund, should I be reducing my AVC's etc to avoid getting to 1.25m at all costs?

Are there any other tactics I can deploy as the tax and NI relief means its a lot better to grow my pension fund than take the cash.

diveleader

Congratulations on having built up such a fund!
Your probable already covered but have you :
maxed your (and your partners ISA limits?)
have you thought of contributing to a pension for your partner?

dunstonh

Just wondering what people who are expecting to hit the LTA limit are doing about it?

Well, in 2006 they could have applied for primary or enhanced protection. Then a couple of years ago, they could have applied for fixed protection. Or shortly they will be able to apply for a second tranche of fixed protection (although terms are as not as good as the first tranche)

Did you apply for any of the transitional protections previously?

fizio

diveleader wrote: »

Congratulations on having built up such a fund!
Your probable already covered but have you :
maxed your (and your partners ISA limits?)
have you thought of contributing to a pension for your partner?

yes i have maxed ISA's for me and my other half
I've not done anything for my other halfs pension (she is a part time teacher) as I am not sure how that will help if i'm trying to use my salary and save tax...

fizio

dunstonh wrote: »

Well, in 2006 they could have applied for primary or enhanced protection. Then a couple of years ago, they could have applied for fixed protection. Or shortly they will be able to apply for a second tranche of fixed protection (although terms are as not as good as the first tranche)

Did you apply for any of the transitional protections previously?

To be honest I thought that all these 'protections' were aimed at people already above the limits and I wasn't eligible.. I have not applied for any protections so far and not sure its an option for me now?

dunstonh

haf63 wrote: »

To be honest I thought that all these 'protections' were aimed at people already above the limits and I wasn't eligible.. I have not applied for any protections so far and not sure its an option for me now?

They were aimed at those above or close to or likely to get to that point in future.

The only transitional relief that could apply to you going forward is the "new" Fixed Protection which would keep the 1.5mill LTA. (last years one allowed you to keep the 1.8 mill LTA)

fizio

dunstonh wrote: »

They were aimed at those above or close to or likely to get to that point in future.

The only transitional relief that could apply to you going forward is the "new" Fixed Protection which would keep the 1.5mill LTA. (last years one allowed you to keep the 1.8 mill LTA)

I had a look at the new protection and it states :

"Firstly there will be another Fixed Protection option (known as Fixed Protection 2014) under which a scheme member can secure maximum benefits of up to the greater of £1.5m or the SLA.
Elections must be made before 6th April 2014 and the protection will be lost if if there is further benefit accrual or contributions made from this date."

Given that I can't avoid contributions after 2014, this seems to be out of scope for me. I am also unable to do anything with the pension until I actually 'retire'

Aegis

haf63 wrote: »

I had a look at the new protection and it states :

"Firstly there will be another Fixed Protection option (known as Fixed Protection 2014) under which a scheme member can secure maximum benefits of up to the greater of £1.5m or the SLA.
Elections must be made before 6th April 2014 and the protection will be lost if if there is further benefit accrual or contributions made from this date."

Given that I can't avoid contributions after 2014, this seems to be out of scope for me. I am also unable to do anything with the pension until I actually 'retire'

Are you absolutely certain that you can't opt out of your schemes? It's very rare (i.e. I've never actually seen an example of this) that an employee can't opt out of his company's work pension scheme.

Remember that for DB schemes it isn't the employer supporting the fund that counts as a contribution but rather your increased benefit after inflation is accounted for.

dunstonh

I made the unusual recommendation last year that someone opt out a defined benefit scheme to get the first fixed protection. I got it checked and double checked as such a recommendation scared the hell out of me from an adviser point of view. However, since the LTA limit has gone down again, I am really pleased we did it.

Aegis

dunstonh wrote: »

I made the unusual recommendation last year that someone opt out a defined benefit scheme to get the first fixed protection. I got it checked and double checked as such a recommendation scared the hell out of me from an adviser point of view. However, since the LTA limit has gone down again, I am really pleased we did it.

I'm not surprised, your client must be delighted. We had a similar situation but recommended that the client commence his pension rather than opting out, which also worked well.

grey_gym_sock

opting out of DB is a tough call, but isn't stopping AVCs an obvious move in this situation? it's not as if the top rate of tax is 98% - you're only paying 40% or 50%