Phased or total crystallisation?

cfw1994

Dox wrote: »

People do get very fretful about possibly breaching the LTA (a problem lots of others would love to have!), but given the tax isn't regressive, it's not necessarily such a big deal if you do. After all, it means you have even more in your pension; it's not as if the tax takes away all the benefit of that.

Checkout the numbers here: you say the tax “isn’t regressive”: it does rather look like it costs you more paying it than managing to avoid it....

zagfles

anselld wrote: »

I think I agree with the theory, but in practice over the last two years the LTA has grown more than my pot. Fortunately I was too indecisive to do much in the way of crystallisation. Still undecided!

Indeed - if the LTA grows faster than your investments then there's no problem. But the PP seemed to be assuming 6% growth - much higher than the LTA is increasing or is likely to increase.

shinytop

I think I might look into:
- crystallising enough to (1) live off TFLS until DB pensions and fill up 2xISA allowances over the next 2 years. That should be all the TF amount ; and
- drawing down as much as I can whilst staying below HRT threshold for a few years.

I'll also look at just crystallising the lot and paying any tax on unwrapped investments. I think if I do something along either of these lines, the only way I'm going to have a LTA problem is in in the event of an incredibly good market run from which I will benefit anyway, LTA or not. Back to the spreadsheets!

I know I'm in a fortunate position to have this 'problem' but this is unexpectedly complicated.

saver_ali

shinytop wrote: »

I think I might look into:
- crystallising enough to (1) live off TFLS until DB pensions and fill up 2xISA allowances over the next 2 years. That should be all the TF amount ; and
- drawing down as much as I can whilst staying below HRT threshold for a few years.

I'll also look at just crystallising the lot and paying any tax on unwrapped investments. I think if I do something along either of these lines, the only way I'm going to have a LTA problem is in in the event of an incredibly good market run from which I will benefit anyway, LTA or not. Back to the spreadsheets!

I know I'm in a fortunate position to have this 'problem' but this is unexpectedly complicated.

Thanks to the posts on this thread, I have come up with a plan, but it's slightly different to yours. We're going to crystallise most of my husband's Sipp, put £40k into our S&S ISAs straight away, and the rest will be invested in funds (keeping careful eye on CGT) - and we might treat ourselves to a new bathroom and have a trip to New Zealand! Then we'll gradually transfer the investments to the ISAs over the next few years.

We're not going to live just on the TFLS. We're going to withdraw something from the drawdown fund each year, to make use of his personal tax allowance and the basic rate tax band. We don't want to get in the situation where, once the DB and state pensions kick in, we can't get much out of drawdown without hitting higher rate tax. In the event of a significant market drop, we might minimise drawdown till it recovers.

When my husband's DB comes in, he should be below the LTA (political intervention aside), but he'll have a bit of DC left, and we'll take that last, so if he goes slightly over LTA we will pay the tax on that.

It will be a balancing act, and I'll just have to keep an eye on everything - how the market is performing, LTA, tax bands, CGT, IHT, safe withdrawal rates, etc. At least it will be something to keep my brain active in retirement! My husband only has another 4 days left at work. We're very excited about it all!