25% PCLS plus LTA excess question

Triumph13

I'm so glad you asked this question as it made me realise I was about to muck up my own treatment of LTA and TFLS for quite different reasons. Back to the drawing board.

fizio

Triumph13 wrote: »

I'm so glad you asked this question as it made me realise I was about to muck up my own treatment of LTA and TFLS for quite different reasons. Back to the drawing board.

Glad to help and I am currently looking at 5 spreadsheet options on how to take my pension while attemting to stay out of HRT and have some control over non db element and maximise tax-free.

On the plus side I now feel like a bit of an expert having researched a ton over last few months

jamesd

You could keep the maximum tax free lump sum by crystallising some from the DC before you take the DB.

fizio

sadly tht is not an option due to the restrictive nature of the scheme and the db/dc linkage- only option is to transfer out dc but then the 25% goes with it.

Its been a useful thread even though i ended up in the same situaton i started - which was always the moist likley outcome as i had investigated a lot.
On balance giving up a small element of tax free is worth it to get control of the bigger pot.

jamesd

haf63 wrote: »

A second DC pension is worth 200k and subject to LTA.

But you wrote about a second DC scheme. Maybe you meant AVC linked to DB but if not, you could use it.

The LTA isn't scheme-specific. 25% tax free is only allowed on crystallisations up to the LTA so that'd just restrict the DB 25% that you're already restricting to less than 25% - it'd be restricted to 25% of the combined value below the remaining LTA.

If there's only one DC (the AVC) and you're planning to take 100% of it tax free based on combined DB and AVC value this can't help. But if there is a second DC it can.

ffacoffipawb

jamesd wrote: »

But you wrote about a second DC scheme. Maybe you meant AVC linked to DB but if not, you could use it.

The LTA isn't scheme-specific. 25% tax free is only allowed on crystallisations up to the LTA so that'd just restrict the DB 25% that you're already restricting to less than 25% - it'd be restricted to 25% of the combined value below the remaining LTA.

If there's only one DC (the AVC) and you're planning to take 100% of it tax free based on combined DB and AVC value this can't help. But if there is a second DC it can.

If the OP could provide some numbers it would help. They don't need to be exact.

fizio

I will attempt to clarify with numbers but this is a simplified version still.
DB value = 600k
DC linked to DB value = 400k
If DC used for 25% cash then rest has to be used to buy an annuity
If DC transferred out then 25% cash gets separated. DC can only be transferred out in full or not at all


I Do not wish to take aany cash from DB commutation so 2 options are
1. take 25% and the annuity at 1.x% rate
2. transfer out and take 25% from DC only


Option 2 means I have hit LTA but not used up 25%


There is a third separate pot at 200k which is all LTA excess so my original question way back was if i could take any tax free from third pot as I haven't taken all 25%.


This is very simplified as the DB and DC both contain all sorts of linked AVC/ASC which further restricts what you can do but I have had numerous in-depth discussions with the Trust and there are no other options available to me aside from 1 or 2 that work for me. The Trust have nothing to do with Pot 3 hence they can't comment on what I can/should do with it hence I am here :-)



much appreciated

jamesd

haf63 wrote: »

There is a third separate pot at 200k which is all LTA excess so my original question way back was if i could take any tax free from third pot as I haven't taken all 25%.

None of it is LTA excess if you take it before the others.

Similarly, the buy an annuity constraint on the 400k linked DC is so bad that it looks best to transfer that, take 25% then use drawdown perhaps with some state pension deferral from the 75%

After that you can take DB with no lump sum and there will be a lifetime allowance charge on the part of its value above LTA - 200k - 400k. In this case you should ask how they work out the reduced after charge pension value. Fair would be calculate CETV, deduct charge amount from CETV then pay pension equal to the percentage of CETV that remains. But they could attempt to profit by using the 20x multiplier or ordinary commutation rate instead of the actual cost from the CETV calculation. If they don't use the CETV then it's likely to be my view that they are engaging in tax fraud by deducting more than the tax due and keeping the extra.

fizio

jamesd wrote: »

None of it is LTA excess if you take it before the others.

Similarly, the buy an annuity constraint on the 400k linked DC is so bad that it looks best to transfer that, take 25% then use drawdown perhaps with some state pension deferral from the 75%

After that you can take DB with no lump sum and there will be a lifetime allowance charge on the part of its value above LTA - 200k - 400k. In this case you should ask how they work out the reduced after charge pension value. Fair would be calculate CETV, deduct charge amount from CETV then pay pension equal to the percentage of CETV that remains. But they could attempt to profit by using the 20x multiplier or ordinary commutation rate instead of the actual cost from the CETV calculation. If they don't use the CETV then it's likely to be my view that they are engaging in tax fraud by deducting more than the tax due and keeping the extra.

Thanks, I didn't think of taking the 3rd pot and then seeing how LTA excess is paid for via DB pot.