Quick question on LTA and how it works.

madeinireland_2

Thanks guys - that's great - at least I know it's now worth the effort of crystallising if I can.

I will be pull the rest of the DC out fairly quickly so I don't think that will be an issue.

Thanks again.

JuneAB

Daniel54 wrote: »

The penalty rate is 25% - and who knows if this will still exist when the OP is 75 ?

Even accounting for the 25% , leaving the SIPP IHT free pre or post age 75 can still be tax effective for estates otherwise subject to IHT

But agree drawing down the excess growth as income might be the better way to go

It is 55%.

55% if you take LTA excess as a lump sum, if you take it as income a 25% LTA charge is applied to the fund in excess of 100% LTA, plus 25% tax on the income which equals 55% in the end anyway.

JuneAB

madeinireland wrote: »

Thanks guys - that's great - at least I know it's now worth the effort of crystallising if I can.

I will be pull the rest of the DC out fairly quickly so I don't think that will be an issue.

Thanks again.

Of course you can always apply for Fixed Protection 2016 which will give you an LTA of £1.25m, assuming you no longer wish to make further contributions / accrue final salary benefits post April 16.

Daniel54

JuneAB wrote: »

It is 55%.

55% if you take LTA excess as a lump sum, if you take it as income a 25% LTA charge is applied to the fund in excess of 100% LTA, plus 25% tax on the income which equals 55% in the end anyway.

The surcharge is 25%

If taken as a lump sum it is 55% ( deemed to be 40% income tax )

If drawn down at 40% income tax then equals 55% ( 25% +40% on 75%)

If drawn down ( or left to descendants) at 20% income tax it equals 40% ( 25% +20% on 75%)

If left to descendants at nil rate income tax band it is 25% (better than 40% IHT)