Income from SIPP in Drawdown - tax treatment

coyrls

Thanks, I went back to the HMRC documents and I think I've got it now. What you say agrees with my (new) understanding.

peterg1965

All this talk of LTA has me thinking again!

I have a Final salary AFPS pension in payment from May this year, so crystallised when the LTA is £1.25M. Its valuation was £769,000 and I have a letter from the pension provider to say that I have used 61.5% of the LTA.

I have a SIPP and a Company DC pension (new employer) and currently have £117000 combined in them and contributing about £19000 Gross to both.

So, am i right in saying that when I retire from this current job in about 5 years, when I am 55/56, and then combine both pots into the SIPP before I crystallise, I can have 38.5% of the prevailing LTA in 2020/2021 before I am subject to additional tax? Assuming that LTA's £1M plus a couple of years indexation from 2018/19, that will be in the order of £400k, not that I will have that much in the funds. The only danger is if the LTA is further reduced, but I have time to respond to this by adjusting savings.

So when I crystallise the second pension at 55ish, i will not be subject to any other LTA test until 75, is this correct?

coyrls

peterg1965 wrote: »

All this talk of LTA has me thinking again!

I have a Final salary AFPS pension in payment from May this year, so crystallised when the LTA is £1.25M. Its valuation was £769,000 and I have a letter from the pension provider to say that I have used 61.5% of the LTA.

I have a SIPP and a Company DC pension (new employer) and currently have £117000 combined in them and contributing about £19000 Gross to both.

So, am i right in saying that when I retire from this current job in about 5 years, when I am 55/56, and then combine both pots into the SIPP before I crystallise, I can have 38.5% of the prevailing LTA in 2020/2021 before I am subject to additional tax? Assuming that LTA's £1M plus a couple of years indexation from 2018/19, that will be in the order of £400k, not that I will have that much in the funds. The only danger is if the LTA is further reduced, but I have time to respond to this by adjusting savings.

So when I crystallise the second pension at 55ish, i will not be subject to any other LTA test until 75, is this correct?

Yes, that is my understanding. I think are some other events that could trigger an LTA test before 75, e.g. if you convert funds in flexi-drawdown to an annuity but if you don't trigger any of those tests, you will have one at 75 if you still have funds in flexi-drawdown.