LTA and short-term DB payment

marlot

I'm over the LTA. Retired early. :-)

One of my DB schemes has a small additional payment which is payable from age 60 to state pension age. Maybe £400 a year, but just for 6-7 years.

I've been trying to find out how that is tested for LTA. Can anyone advise?

THanks!

Aegis

marlot wrote: »

I'm over the LTA. Retired early. :-)

One of my DB schemes has a small additional payment which is payable from age 60 to state pension age. Maybe £400 a year, but just for 6-7 years.

I've been trying to find out how that is tested for LTA. Can anyone advise?

THanks!

Exactly the same as though that income was paid for life, unfortunately.

fizio

marlot wrote: »

I'm over the LTA. Retired early. :-)

One of my DB schemes has a small additional payment which is payable from age 60 to state pension age. Maybe £400 a year, but just for 6-7 years.

I've been trying to find out how that is tested for LTA. Can anyone advise?

THanks!

Its worth checking with your pensions trust as I am in a similar boat and the trust have said they are looking at a way to spread the payment across all years but at a much reduced rate obvioulsy - resulting in a much smaller LTA hit overall. Longshot but worth asking. I also know a few people who are trying to see if they can simply refuse the payment as they are better off without itbased on their numbers.

marlot

fizio wrote: »

Its worth checking with your pensions trust as I am in a similar boat and the trust have said they are looking at a way to spread the payment across all years but at a much reduced rate obvioulsy - resulting in a much smaller LTA hit overall. Longshot but worth asking. I also know a few people who are trying to see if they can simply refuse the payment as they are better off without itbased on their numbers.

Yes, when I run the numbers, it may be better to forego it. I'll see if they are amenable to being creative.

I'd be quite happy to donate it to charity if there was a tax efficient way.

cfw1994

Curiously, I have a small employment pension which will kick in from 65.
It offers up 2 options:

The first offers £X pa: this one tells me the %LTA it will use is estimate at 10.34% based on LTA today.
The second with a cash lump sum and a smaller £Y pa. This one suggests it will use 9.8% LTA.

I don't understand why there are the LTA differences.....but in your case, perhaps if you can take TFLS you might get a lower % left (to be taxed!)

fizio

cfw1994 wrote: »

Curiously, I have a small employment pension which will kick in from 65.
It offers up 2 options:

The first offers £X pa: this one tells me the %LTA it will use is estimate at 10.34% based on LTA today.
The second with a cash lump sum and a smaller £Y pa. This one suggests it will use 9.8% LTA.

I don't understand why there are the LTA differences.....but in your case, perhaps if you can take TFLS you might get a lower % left (to be taxed!)

This is not unsual as it depends how the scheme has been setup. The calculation for 20 x per annum can be different to the dc pot value - though i have seen it the other way i.e lower LTA with just per annum than with lumpsum.

fifer60

Aegis wrote: »

Exactly the same as though that income was paid for life, unfortunately.

I have the same problem, my pension remains pending, but I found out about it when doing calculations for LTA in 2016.

I have a supplement y paid for 2 years it's an anachronism from the 1980s. So I assumed that LTA would be

(20* DB) + (2* y) which would be a fair assessment, reflecting the finite nature of the supplement.

but it is actually

20* (DB + y) which has no scientific justification

The reason is that the wording in law is based upon "starting value of pension". The interpretation is as shown above, which is a crime against numeracy.

The outcome means potential taxation, at a future date on other pensions, effectively at more than 100%, which i consider to be modern slavery being perpetrated by the British Government.

My trustees and admins advised that HMRC is being inflexible. I asked if I could decline the supplement, apparently it is hard wired in the deeds, so no give on that so far.