Lifetime allowance query

fcandmp

In terms we the difference between phased drawdown and UFPLS and potential benefit of UFPLS, one consideration is IHT as the funds retained in the SIPP are I believe not treated as part of the estate.

Also, as I said if you don't need access to the large pension commencement lumpsum, the benefit of the marginal gains in LTA should (if the government sticks by its promises) achieve year on year from 2018. If CPI were static at say 2% on my reckoning that's £20k increase in LTA year on year compound. By the final year before SP / DB pension kicks in you might have saved over 4% LTA usage over crystallising a single large amount upfront set against the £1m LTA currently.

Only you can tell how relevant this might be to you in the bigger picture.

fcandmp

JAmesD, you mention the reduction in LTA used with respect to the actuarial reduction if someone retires early. Is there a similar but positive impact if someone defers taking DB scheme benefits, as the amount at payment will be higher than at NRD?

Many thanks

jamesd

It depends on the scheme, ask. Some give no increase at all for waiting. On the few occasions when it's been mentioned the increase didn't seem very good.

fcandmp

JAmesD thanks, I will contact them, but I wondered whether there were generic LTA tax rules concerning any increase achieve by deferral? This would be an HMRC stipulation rather than the scheme itself wouldn't it?

marlot

fcandmp wrote: »

JAmesD thanks, I will contact them, but I wondered whether there were generic LTA tax rules concerning any increase achieve by deferral? This would be an HMRC stipulation rather than the scheme itself wouldn't it?

I think you're asking ... Can I have a higher LTA if I defer my DB pension?

The answer is no. Its a very crude 20* the annual payment (+any lump sum). Regardless of the age at the start.

My brother in law gets a very early pension from the army (age 40-ish). Despite it being worth very much more than one which only starts at age 65 (say), the formula for valuing it is still 20* the annual payment.

I'm planning to take some of my DB pensions early to help me squeeze under the LTA.

fcandmp

Merlot, thanks, but not quite what I was asking.

Whilst I appreciate the actual LTA remains fixed, I am asking whether the % used will increase if I defer beyond NRD. I.e. If I crystalised at a value of £5k per annum (£100k) at age 60, I would use 10% of my LTA. But if I deferred and two years later the pension was £6k per annum (£120k), would the % of LTa used now be 12% at age NRD +2. ?

marlot

fcandmp wrote: »

Merlot, thanks, but not quite what I was asking.

Whilst I appreciate the actual LTA remains fixed, I am asking whether the % used will increase if I defer beyond NRD. I.e. If I crystalised at a value of £5k per annum (£100k) at age 60, I would use 10% of my LTA. But if I deferred and two years later the pension was £6k per annum (£120k), would the % of LTa used now be 12% at age NRD +2. ?

As said, it's a simple 20x

So if the LTA remains £1m, 5k a year is 10% and 6k a year is 12%.