Lifetime Allowance Calculation

D94ccm

Hi all,

I'm currently a teacher paying into my TPS.

I'm aware that you can only contribute 40K pa and have a pot of 1m in your lifetime before addition tax rules come into play.

I have logged into my TPS account but for some reason cannot find out what my absolute total pot is worth or my contributions to date. All I seem to be able to get is what my current annual payment will be and what my lump sum is due to be, along with a percentage of my lifetime allowance.

It tells me; "Your total pension amount represents 16.83% of the current Lifetime Allowance at this statement date. "

This suggests to me that my current pension is worth £168,300.00

Is this assumption correct? I've only accrued about 10 years of service to this point and I can't imagine I've paid in about half of this amount before gaining a match from my employer.

I'm trying to calculate how much I can place into a SIPP without hitting the tax penalties.

Thanks in advance

Fermion

For DB schemes they calculate the Lifetime Allowance based on a multiplier of the accrued "ref salary benefits" - I believe they use a x25 multiplication factor. There really isn't such a think as a pension pot with DB. So your total accrued pension is probably something like £6,732/annum which x25 gives £168,300 or 16.83% of the current Lifetime Allowance.

zagfles

Your pension is likely to be worth much more than £168k. The LTA calculation for DB schemes is 20 times your pension, so £168k indicates a pension of around £8400. That's easily possible over 10 years in a generous final salary or CARE scheme which the TPS undoubtably is.

The actuarial value of a £8400 pension is much higher than £168k, more like £240k (based on typical index linked annuity rates of around 3.5% at state pension age).

It might seem incredible, but that really is how good your pension is!

Also for the purposes of the annual allowance the amount you (and your employer) pay in is irelevant, it's based on the increase in pension benefit. This is quite hard to work out, as rough approximation in a CARE scheme it's 16 times the amount the pension increases, but you need to be careful because the indexation used for AA purposes may not match the indexation used for revaluing past years' service. In fact it almost certainly won't. You can ask the scheme for pension input amounts for past years, or your statements might tell you.

D94ccm

Thank you both for your comments here. Both really helpful.

OldBeanz

A relative is becoming a teacher and you are able to buy up to an extra £6.5k pension in £250 increments which is index linked (CPI), + 1.5% if you stay in service. It appears to be extremely good value for someone starting out so may be worth investigating. Dunstonh recently suggested that the TPS AVCs while being restrcted are good value for money. The AVCs could be taken pre-retirement.