Approaching LTA....

Ciprico

Apart from stopping any further pension contributions what can one do if they feel they may breach the LTA in the future...

I suppose there are no obvious tricks to think about

(I read about the various "protections" but in most current cases I suppose they don't apply, and certainly not to me).

So apart from watching one's pension total, and crystalising everything at £1m are there any other considerations that one should think about in advance....?

lisyloo

Retire is one answer.

Another option is use spouses pension if possible. My spouse pays me dividends on which I pay 7.5% tax and I salary sacrifice to get 32% tax relief.

I think you’re right though, there aren’t any other loopholes.

Congratulations on that particular first world problem (I remember well the day someone was stealing my chai tea bags and a long haul holiday was cancelled - makes me chuckle a bit).

greatkingrat

If you have a DB pension it can be beneficial to take it earlier than the normal retirement age, so it takes up a lower percentage of the LTA.

Albermarle

Few things you can do are:
Crystallise early to get the TFC out of the pension, so any future growth in the TFC portion will be outside the pension. Try and time this after a market downturn if possible,
Dial down the risk/growth profile of the investments in the pension . Compensate by increasing the risk/growth profile of investments outside the pension
Make sure you take income from the crystallised part to avoid problems with growth counting towards the second LTA at 75.
Maybe do not over worry about it too much especially if you are not going to be that far over . The extra tax is only on the excess over LTA, not on all of it. I think it is normally advised to keep making minimum contributions necessary to maximise employer contributions and worry about the LTA later.

Thrugelmir

123mat123 wrote: »

So apart from watching one's pension total, and crystalising everything at £1m are there any other considerations that one should think about in advance....?

LTA isn't a £1m. Currently £1.055m for the 19/20 tax year . Rises annually with CPI.

Market values of investments can fluctuate widely very suddenly. If your pension savings are outside of a DB scheme.

lisyloo

Thrugelmir wrote: »

LTA isn't a £1m. Currently £1.055m for the 19/20 tax year .

I don’t know how this works on DB but if it’s DC then don’t you need to stop before £1m? Or £1,055,000?
There is a second BCE at 75 and it’s possible for growth to then exceed LTA.

Rough figures, but if £750k is in a drawdown fund and £50k per annum is drawdown then you only need returns of >6.66% to exceed LTA, not factoring in SP.

Delighted to be corrected.

jaybeetoo

lisyloo wrote: »

I don’t know how this works on DB but if it’s DC then don’t you need to stop before £1m? Or £1,055,000?

Incorrect.

lisyloo

jaybeetoo wrote: »

Incorrect.

Could you explain please.
I’ve discussed this on a thread here before and it was confirmed that there is a danger of exceeding LTA at 2nd BCE if growth exceeds drawdown over they years between retirement and 75.

lisyloo

Can anyone else throw any light on this please?
I enquires about this before and the conclusion was gains could be an issue if they exceed drawdown

https://forums.moneysavingexpert.com/discussion/5876561/lta-confusion&highlight=lta&page=2

Albermarle

There is a second BCE at 75 and it’s possible for growth to then exceed LTA.

This is correct , which is why I said following in previous post :

Make sure you take income from the crystallised part to avoid problems with growth counting towards the second LTA at 75.

lisyloo

Thank you.
As someone averse to paying 40% tax I see a limit to drawdown, which I think can only be avoided by stopping contributions below LTA.
I understand 40% is better than breaching LTA.