Life time allowance query

secondincometrader

Hi, I'm 52 and have a £600k DC pension due at 55 and a £400k DB pension due at 60. I will take the 25% tax free cash from the £600k DC at 55, go into drawdown and I'm assuming that will be a benefit crystallisation event against the £1m LTA. Ignoring the annual LTA increase of CPI, come age 60 when I draw on the DB pension and take the 25% lump sum, will the LTA calaculation be against the £400k and ignoring the previous £600k, or will any increase in the value of that 600k pension pot from 55 be factored into the LTA calculation at 60 and see me over the £1m limit? Many thanks.

kidmugsy

secondincometrader wrote: »

Hi, I'm 52 and have a ... and a £400k DB pension due at 60.

A DB pension is defined in terms of the pension (and perhaps lump sum) it will pay you, not in terms of a lump of capital.

So what exactly do you mean?

jamesd

The LTA calculation will be twenty times the annual income that the DB pension will pay. Its CETV has no effect.

Yes, taking the 25% from the DC pot will be a BCE and would at current value use 60% of your LTA. No subsequent increases to this matter until age 75. At that point the increase in value of the 75% portion will use more LTA. The easiest way to avoid that is to draw an income from it so it doesn't grow.

When you get to 60 the unused LTA will be 40% of whatever the LTA is then. It's the percentages that get tracked and retained, not currency value.