advice on minimising LTA tax

cymraescaerdydd

Grateful for blog wisdom on a problem that I shouldn't complain about really - but glad if I can keep the tax as low as posss. Im just over LTA - about £3500. It it better to pay off the tax in full from a lump sum or have a £180 reduction in pension per year? Im wondering if after 20 years it will be a significant pension difference (assuming I last that long!) Thanks for advice.

ffacoffipawb

cymraescaerdydd wrote: »

Grateful for blog wisdom on a problem that I shouldn't complain about really - but glad if I can keep the tax as low as posss. Im just over LTA - about £3500. It it better to pay off the tax in full from a lump sum or have a £180 reduction in pension per year? Im wondering if after 20 years it will be a significant pension difference (assuming I last that long!) Thanks for advice.

Noswaith dda cymraescaerdydd

Newid i Saesneg rwan.

The tax will be 25% of the excess if taken as income so would be about £875.

If you think you will live longer than 10 years as a higher rate taxpayer (likely if over LTA) then it seems best to pay the tax than lose some of the pension, especially if the lost pension increases in oayment.

cymraescaerdydd

diolch ffacoffipawb


sorry Im struggling with the figures- my own ignorance, sorry.

The quote I have seems to show that the pension reduction (I assume per year- USS do not respond to questions terribly efficiently) is about £180. Im not sure if this is an absolute reduction (for ever?) in which case its relative value would decrease over time with index linked increases, or a fixed proportion of the pension (for ever? or until the tax is paid off?).
Yes higher rate tax at present as Im continuing to work for a bit, so losing a big chunk of income in tax - but planning to cut down over next year or three, depending on kids producing kids. Youre right- my concern is that an apparently innocent couple of hundred quid lost now will become a significant loss in 10-20 years with inflation. thanks for your help.