LTA excess tax charge on DB pension ?

LONDONFIRE

Hi
Grateful if anybody could clarify whether I am likely to incur a LTA excess tax charge when start drawing my DB pension scheme as a result of annual RPI increases ?
Say I have 2016 individual protection of £1.2m and a DB pension of £60,000 pa.
Therefore no initial LTA excess on commencement, as £60k pa x 20 = £1.2m
However in year 2 pension will increase by RPI to say £61,800 (+3%), will I incur a 25% LTA excess tax charge on the £1,800 increase ?
Not sure if pension is measured versus LTA at commencement (BCE) or on an annual basis ?
Many thanks

Aegis

Only at commencement for DB schemes.

BobQ

LONDONFIRE wrote: »

Hi
Grateful if anybody could clarify whether I am likely to incur a LTA excess tax charge when start drawing my DB pension scheme as a result of annual RPI increases ?
Say I have 2016 individual protection of £1.2m and a DB pension of £60,000 pa.
Therefore no initial LTA excess on commencement, as £60k pa x 20 = £1.2m
However in year 2 pension will increase by RPI to say £61,800 (+3%), will I incur a 25% LTA excess tax charge on the £1,800 increase ?
Not sure if pension is measured versus LTA at commencement (BCE) or on an annual basis ?
Many thanks

At commencement. The LTA applies to all occupational pensions so if you have other pensions you may need to include those too.

zagfles

As above, at commencement. However there is BCE3 which can occur afterwards if the pension is increased by more than a permitted margin, but RPI is fine. See https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm088630