Lifetime allowance & 25% tax free

CCCS

Male, 48, married, 2 kids. DB pension of £5800 from 67, DC pension currently at £600k. I contribute 12% of salary and company contributes 10%. House worth £600k with mortgage of £90k
2 questions for the forum:-
Q1) The various different pension calculators out there, some which predict my pot will blow the LTA, some which predict it may under shoot the threshold (plan to retire at 60). Is there an online calculator that the forum would recommend? I an trying to understand if I should reduce my AVCs now, or keep paying at same rates to avoid breaching the LTA.

Q2) I am aware I can access 25% tax free. If I request to do this [at say 55], am I able to do this while still working and still contributing to the same company pension scheme? The context to this question is, we are considering moving home, and I'd be happier knowing I could potentially pay off any new mortgage debt with the tax free 25% so long as I dont have to retire to access it? Hope that makes sense

Linton

CCCS wrote: »

.......
Q2) I am aware I can access 25% tax free. If I request to do this [at say 55], am I able to do this while still working and still contributing to the same company pension scheme? The context to this question is, we are considering moving home, and I'd be happier knowing I could potentially pay off any new mortgage debt with the tax free 25% so long as I dont have to retire to access it? Hope that makes sense

Legally you can, or rather there is no law that says you cannot. Whether your employers pension scheme would permit it is another matter. Some schemes require that you leave the scheme before you take money out. So talk to your employer's pension people.

Albermarle

predict it may under shoot the threshold (plan to retire at 60). I

With respect to the LTA , when you retire is not directly relevant . The LTA contribution is calculated at each crystallisation event , so for example when you take the Tax free cash before you retire. Also when you take your DB pension at 67( or earlier ) and any other time you take pension benefits .
Finally any money you have left in the pot at 75 is counted . As this will be the last crystallisation event , this is apparently when a lot of people get hit as it takes them over the limit.

CCCS

thanks, I hadnt realised that -was simply looking at the projections and seeing the value higher than the LTA.
Re 75 years old point - just so Im clear..
Do you mean any remaining balance of pension still undrawn by age 75 is then valued and added to previous crystallization events, and hence if the total at that point is higher than LTA, then higher tax applies on this remaining balance?
I assume this catches people out as a fund valued at age 75 is notionally higher than the same amount valued at any earlier age (assuming growth) hence pushing them over the LTA?

Brynsam

People do get very hung up on the LTA. Remember that after several episodes of being reduced, the LTA is now on the up again (although who knows what will happen in the future).

There's a good article at https://www.robertsonbaxter.com/news/five-common-misunderstandings-pension-lifetime-allowance which is well worth reading.

CCCS

Thanks Brynsam - that was a very useful link which explains LTA and the various views clearly.

zagfles

CCCS wrote: »

thanks, I hadnt realised that -was simply looking at the projections and seeing the value higher than the LTA.
Re 75 years old point - just so Im clear..
Do you mean any remaining balance of pension still undrawn by age 75 is then valued and added to previous crystallization events, and hence if the total at that point is higher than LTA, then higher tax applies on this remaining balance?
I assume this catches people out as a fund valued at age 75 is notionally higher than the same amount valued at any earlier age (assuming growth) hence pushing them over the LTA?

Uncrystallised amounts, plus if any crystallised amounts are higher than when crystallised. Google LTA BCE and you'll get loads of helpful articles