that damn lifetime allowance thing

srhoden

hi who knew pensions were so complicated. anyone good at math - how do i work out what is the %lifetime allowance of a one off lump sum of £2996.58?
this what i will receive from £3525.38 after 20% tax has been deducted. i dont know how to work it out.

Marcon

The pension provider will confirm at the time payment is made, but if this is from a DC scheme, it is £3,525/£1,073,100 - but the figures look a bit odd. Why is only a small part of this (rather than 25%) being paid tax free?

srhoden

Marcon said:

The pension provider will confirm at the time payment is made, but if this is from a DC scheme, it is £3,525/£1,073,100 - but the figures look a bit odd. Why is only a small part of this (rather than 25%) being paid tax free?

the level of contributions is £3525.38 but i am taking it out early - 59 - in one off payment so they said it will be taxed at 20% meaning i receive £2996.58 so i guess that is the amount i need to know the % lifetime allowance for? i’m not too worried about paying some tax as i will have no income so HMRC will have to return it the following year.

srhoden

sorry am i dividing the first figure by the second figure?

Marcon

srhoden said:

sorry am i dividing the first figure by the second figure?

Sorry, read the post to mean you'd be taxed at 20% on the whole £3,525.38. 

It's the £3,525.38/LTA that you need: 0.32% of the LTA, although as this could be classed as a 'small pot' (under £10K), if you are specifically cashing it in on that basis it doesn't count towards the LTA at all.

Dazed_and_C0nfused

srhoden said:

hi who knew pensions were so complicated. anyone good at math - how do i work out what is the %lifetime allowance of a one off lump sum of £2996.58?
this what i will receive from £3525.38 after 20% tax has been deducted. i dont know how to work it out.

You may be slightly disappointed to note that £3525.38 will become £2820.38 after the deduction of basic rate tax.  Not £2,996.38.

Secret2ndAccount

Dazed_and_C0nfused said:

srhoden said:

hi who knew pensions were so complicated. anyone good at math - how do i work out what is the %lifetime allowance of a one off lump sum of £2996.58?
this what i will receive from £3525.38 after 20% tax has been deducted. i dont know how to work it out.

You may be slightly disappointed to note that £3525.38 will become £2820.38 after the deduction of basic rate tax.  Not £2,996.38.

I think it will be 2996. The first 25% is tax free

Dazed_and_C0nfused

Secret2ndAccount said:

Dazed_and_C0nfused said:

srhoden said:

hi who knew pensions were so complicated. anyone good at math - how do i work out what is the %lifetime allowance of a one off lump sum of £2996.58?
this what i will receive from £3525.38 after 20% tax has been deducted. i dont know how to work it out.

You may be slightly disappointed to note that £3525.38 will become £2820.38 after the deduction of basic rate tax.  Not £2,996.38.

I think it will be 2996. The first 25% is tax free

I'm clearly missing some key element here as that makes even less sense 

Marcon

Dazed_and_C0nfused said:

Secret2ndAccount said:

Dazed_and_C0nfused said:

srhoden said:

hi who knew pensions were so complicated. anyone good at math - how do i work out what is the %lifetime allowance of a one off lump sum of £2996.58?
this what i will receive from £3525.38 after 20% tax has been deducted. i dont know how to work it out.

You may be slightly disappointed to note that £3525.38 will become £2820.38 after the deduction of basic rate tax.  Not £2,996.38.

I think it will be 2996. The first 25% is tax free

I'm clearly missing some key element here as that makes even less sense 

£3525.38 x 25% = £881.35
£3525.38 x 75% = £2644.04

£881.35 + (£2644.04 x .8) = £881.35 + £2115.23 = £2996.58

srhoden

Marcon said:

srhoden said:

sorry am i dividing the first figure by the second figure?

Sorry, read the post to mean you'd be taxed at 20% on the whole £3,525.38. 

It's the £3,525.38/LTA that you need: 0.32% of the LTA, although as this could be classed as a 'small pot' (under £10K), if you are specifically cashing it in on that basis it doesn't count towards the LTA at all.

Hi Marcon yes the letter did say it would be classed as a small pot so the LTA % is 0. Thank you very much i would never have got there without help😀

TVAS

You are asking the wrong question. Are your total pension funds nearing to, is likely to get to or is more than £1,073,100. If yes it is a valid question. If no why do you care you are not going to exceed it.