LTA and PCLS vs UFPLS

ADA58

I  am 55 and am looking to take income from a SIPP invested with AJ Bell.  

• Value 1,5M

• LTA of 1,4M ie a 0.3 enhancement certificate from HMRC courtesy of time spent overseas 

• additional BTL income of 15k pa net , in wife’s name   Full state pensions , a small DB scheme in 5 years for wife. 

• outstanding residential mortgage of 65k at base rate plus 0,5% for next 10 years, no other debts , not inclined to clear this 

I am aware if I fully crystallized I would end up with a tax bill around 25k, but have some questions

1.  Is the PCLS 25% of the Standard LTA as opposed to the 1,4m I think it is but nice if it was the latter! 
2,  should I wait till next April, assuming inflation pushes up LTA by 1,5% I could reduce LTA  tax bill by a few thousand 
3. Can I just crystallize  say 1/3 of the SIPP (and  use up some LTA ) take the 25 percent out for isa investments ,leaving the rest to  crystallize   latter in few more tranches and repeat until LTA all used up , alongside taking draw down at marginal tax rate . This would allow some inflation of LTA and help reduce taxes 
4. Alternatively if I went down the UFPLS  route could I take out 25% tax free at each event, all the way up to (over many years ) my LTA of1,4M (which if the govt does not tinker , would increase by inflation) .  This seems to get me eventually 25 percent of the 1,4M unlike if I took the the PCLS now.  75 seems a long way away, so if I am fortunate to be around and with other income , then paying tax charge on remaining pot not a big driver in my decision that will impact my next 20 years of income

appreciate a complex question and IFA maybe a worthwhile investment to help , however would welcome comments and thoughts 

garmeg

1. 25% of the enhanced LTA.

2. if your pension goes up by more than 1.5% the LTA charge will also go up.

3. Yes you can.

4. Yes you can, but see 1 above.

jamesd

What greatly helps your situation is a repeat of the March 2020 equity market drop. That could get you within your available LTA. To maximise the potential for this, favour fixed interest for  crystallised money and equities for uncrystallised. Some provides use one combined account so block this splitting.

gm0

Check your particular protection certificate and indexation treatment carefully in your calculation

Standard LTA is indeed (subject to government future whims) indexed.  Many protection certificiates such as the Fixed Protection series are not indexed creating a fixed value used for % crystallisation calcs at initial BCE and PCLS - "personal LTA".  Either your enhanced value portion or the full "personal LTA" could be routed through the legislation as your personal limit.  Sorry but I don't know the treatment of "enhancements".

It doesn't change the overall picture on crystallisation much.

But it it is mildly unhelpful to the "keep the cash value below the limit until 75 for the 2nd test" part.  For a fund around LTA at the start it creates a need to draw nominal growth (inflationary + real) over the period 55-75 to keep below. Using allowance and BRB.  Consuming/Gifting away/S&S ISA recycling). 

Fine now.  But a period of inflation spike could change that calculation.  Tracking it in a spreadsheet with the wrong indexation treatment could deliver a surprise.  So worth checking carefully.

ADA58

Thanks for the replies, it has helped with my planning.  

I ve re-checked my HMRC CertiFicate for the LTA Enhancement , and it is stated as a factor of 0,33 ie I get 1,33x the LTA on any given date