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Lifetime Allowance
robin61
Posts: 677 Forumite
Guys,
I have been trying to understand how the lifetime allowance works. Could anyone help please.
I believe when a benefit crystalisation event is triggered then you are measured against the lifetime allowance. So for example.
1) Aged 60. Taking a DB pension and a DC pension. Lifetime allowance of £1M
Start taking a DB Pension
£25K per annum x 20 = £500k
PCLS of £150k
So that's £650K used
Then if you had a DC pension as well of £100K and started flexi draw down at age 60 that's another £100K used
So you would have used £750K of the lifetime allowance = 75%
So far so good hopefully.
2) So I believe when you reach age 75 that triggers another BCE ?
Let's suppose the DC scheme is now worth £200K so as I understand it that's another £100K lifetime allowance used. So if the lifetime allowance was still £1m then that's another 10% used so that would put you on 85%
However the DB scheme is index linked and will be more than £25K by then. So lets say that's now worth £35K per annum.
Question - is the DB scheme assessed again ?
Thanks
I have been trying to understand how the lifetime allowance works. Could anyone help please.
I believe when a benefit crystalisation event is triggered then you are measured against the lifetime allowance. So for example.
1) Aged 60. Taking a DB pension and a DC pension. Lifetime allowance of £1M
Start taking a DB Pension
£25K per annum x 20 = £500k
PCLS of £150k
So that's £650K used
Then if you had a DC pension as well of £100K and started flexi draw down at age 60 that's another £100K used
So you would have used £750K of the lifetime allowance = 75%
So far so good hopefully.
2) So I believe when you reach age 75 that triggers another BCE ?
Let's suppose the DC scheme is now worth £200K so as I understand it that's another £100K lifetime allowance used. So if the lifetime allowance was still £1m then that's another 10% used so that would put you on 85%
However the DB scheme is index linked and will be more than £25K by then. So lets say that's now worth £35K per annum.
Question - is the DB scheme assessed again ?
Thanks
0
Comments
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Question - is the DB scheme assessed again ?
No. DB pensions are only assessed once, at the point that they are drawn, or age 75 if they have not been drawn by then. The only exception is if the DB pension has been increased by a substantial amount over and above index-linking or normal scheme practice - in which case they will be re-assessed at the time of the increase, whether before or after age 75. (This might happen if, for instance, your scheme goes through a "Pension Increase Exchange" exercise where they offer you a higher immediate pension in exchange for giving up some or all of your inflation protection in future. The one-off increase in pension then often triggers a "BCE 3" and uses up some more of the Lifetime Allowance.)I am a Technical Analyst at a third-party pension administration company. My job is to interpret rules and legislation and provide technical guidance, but I am not a lawyer or a qualified advisor of any kind and anything I say on these boards is my opinion only.0 -
Thanks PensionTech. Am I right in thinking the DC pension gets re-assessed at 75, even if you start drawdown at 60 ?0
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Yep. More on that here: https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm088650I am a Technical Analyst at a third-party pension administration company. My job is to interpret rules and legislation and provide technical guidance, but I am not a lawyer or a qualified advisor of any kind and anything I say on these boards is my opinion only.0
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[FONT="]My understanding is that if you survive to 75 and trigger a BCE[FONT="] then [/FONT]there is no further BCE at death (unless there is relevant lump sum benefit paid on death, BCE 7). Is that correct?[/FONT]0
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Almost. A BCE 7 can't actually occur if you survive to 75 either - it only occurs on death before 75. The only BCE that can happen at all after age 75 is BCE 3 (see post #2 above).I am a Technical Analyst at a third-party pension administration company. My job is to interpret rules and legislation and provide technical guidance, but I am not a lawyer or a qualified advisor of any kind and anything I say on these boards is my opinion only.0
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PensionTech wrote: »Almost. A BCE 7 can't actually occur if you survive to 75 either - it only occurs on death before 75. The only BCE that can happen at all after age 75 is BCE 3 (see post #2 above).
Great thanks, neither BCE 7 or 3 will apply to me. Just understanding what is relevant to your own case is much easier than trying to get your head around the whole thing!0
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