Another CETV Q; Help Me Thrash It Through...

Thrugelmir

LTA rises by CPI from 6th April annually. For 2018/19 rises by £30k.

An allowance of £1,030,000 seems perfectly adequate to provide for an individuals retirement pension. Given they'll have the state pension too. With a £20k ISA allowance plenty of opportunity to shelter money.

(Taking an impartial detached view).

pip895

The LTA is really quite insidious - You want to aim to get as close to the LTA as you can for a comfortable retirement but exceed it and the costs can be very high.

I am not really that close but if I model another five years like the last five I will exceed it - I guess there are worse problems to have but when you know at any point your portfolio could go down by up to 30% (assuming a balanced portfolio) then it makes planning quite difficult.

Thrugelmir

pip895 wrote: »

The LTA is really quite insidious - You want to aim to get as close to the LTA as you can for a comfortable retirement but exceed it and the costs can be very high.

If exceeding the LTA comes through good fortune (i.e. investment performance). Then nothing has actually been lost.

You are more likely to breach the LTA by withdrawing funds from a DB scheme at the current tiime. As DB schemes normally work on a multiple of 20 * annual pension at the time of taking the benefit (excluding any entitlement to an additional lump sum). The factor doesn't fluctuate unlike the CETV.

cloud_dog

Thrugelmir wrote: »

If exceeding the LTA comes through good fortune (i.e. investment performance). Then nothing has actually been lost.

You are more likely to breach the LTA by withdrawing funds from a DB scheme at the current tiime. As DB schemes normally work on a multiple of 20 * annual pension at the time of taking the benefit (excluding any entitlement to an additional lump sum). The factor doesn't fluctuate unlike the CETV.

I'm not sure these two statements are mutually exclusive, i.e. good fortune on investment returns, as opposed to good fortune on obtaining DB CETV at a most opportune time regarding financial calculations.

Thrugelmir

cloud_dog wrote: »

I'm not sure these two statements are mutually exclusive, i.e. good fortune on investment returns, as opposed to good fortune on obtaining DB CETV at a most opportune time regarding financial calculations.

If had bought Fevertree stock when it listed on AIM in November 2014. A share would have cost you around 160p-170p. £10k would have bought you some 5,880 shares. At todays price of £24.93p your holding would be worth £146,500. That's good fortune. No correlation to gilt yields involved.

pip895

I suppose my aversion to the LTA is the uncertainty it causes - restricting on the input side is OK you can plan for it but restricting what your investments can grow to... Also the second "test" at age 75?? Not fully understanding how that works probably doesn't help.

For me hitting it is a bit of an aspiration, but with you being so close it weighs a bit on the side of not transferring.

cloud_dog

Thrugelmir wrote: »

If had bought Fevertree stock when it listed on AIM in November 2014. A share would have cost you around 160p-170p. £10k would have bought you some 5,880 shares. At todays price of £24.93p your holding would be worth £146,500. That's good fortune. No correlation to gilt yields involved.

I didn't mean there was a correlation in the good fortune, simply that good fortune, by either method (investment growth or financial machinations) may put you in the same position (LTA).

jamesd

pip895 wrote: »

Also the second "test" at age 75?? Not fully understanding how that works probably doesn't help.

Write down the value of the crystallised portions at the time of crystallisation. Do the same at 75. Subtract the first number from the second. Subtract an amount corresponding to your remaining unused lifetime allowance. Pay the charge on anything left. Avoid by taking money out so it isn't higher.

Reduce potential lifetime allowance issues by crystallising DC pots as soon as you reach 55, though tweaking this in various ways can be better.

Daniel54

If you do transfer out you will in any case need to pay for a recommendation from an IFA with the appropriate qualifications.Seems to me you might benefit from finding one now that you like and trust and bounce your views off him or her.

cloud_dog

jamesd wrote: »

Write down the value of the crystallised portions at the time of crystallisation. Do the same at 75. Subtract an amount corresponding to your remaining unused lifetime allowance. Pay the charge on anything left. Avoid by taking money out so it isn't higher.

Reduce potential lifetime allowance issues by crystallising DC pots as soon as you reach 55, though tweaking this in various ways can be better.

IF I go down this route, and IF the CETV comes out near the LTA then my intention would be to crystalise and draw-down the maximum up to the HRT threshold each year.

There have been discussions around, what is commonly referred to as a 'safe draw-down limit/percentage', and taking in to consideration my calculation of 'The Number', anything above the SWL/'The Number' (from the max withdrawal each year) would be put to work in an S&S ISA. By doing this I wouldn't expect to be anywhere near LTA come 75.