Lifetime Allowance Planning

Thrugelmir

LadyGnome said:

 I will reassess each year and start pushing larger amounts into the main pot if needed depending on investment returns.  

Compounding does much of the heavy lifting. Better to start early rather than waiting. Investment returns are far from linear. Markets can rapidly become detached from commercial reality and suffer a correction as a consequence.  

LadyGnome

You are right but it suits me to focus on sorting out the children for a year or two with uni costs and school fees.  I have £500k compounding now so that should bring a good average increase even if last year was painful. 

Thrugelmir

LadyGnome said:

 I have £500k compounding now so that should bring a good average increase even if last year was painful. 

Could happen again at any time and for far longer. Been a remarkably smooth ride for many years. All era's eventually come to an end. 

LadyGnome

You are absolutely correct that markets, can and do, crash.  If the market crashed I would be tempted at that point to bung in the full £40k to take advantage.
We are in a fortunate position compared to many in that once the children are sorted (apparently this does happen at some point  ) and the mortgage is paid off we could cover our basic costs from the rental income. If we add in the DB, some dividends,  MrG's SP and a few years later mine we could sit it out for some extra years if we needed to.  I have over 13 years to pension age and if we had to manage for another couple of years due to poor market timing we could.

jdl920p

I was going to start a new thread, but this seems to a good place to ask my question

If I breach the LTA and take my pension as income is the 25% extra tax on the income a one-off tax charge for the first year or is it charged every year?  I can't seem to find a definitive answer on this

kuratowski

@jdl920p It is charged on the income you take, in whatever year you take it.  So you won't pay it twice on the same slice of money, but you won't avoid it either (on anything taken above the LTA).

jdl920p

@kuratowski thanks - I have read a bit more and understand it better. 

lisyloo

We were worried about LTA (DC pot starting with a 9) because we thought the pot could grow bigger than the amount you can withdraw without paying higher rate tax i.e. approx £50K pa, so you hit BCE2 at age 75.
However we intend to de-risk our investments somewhat, so the chances of the pot growing between 55-75 are lower.
Should we find ourselves in a remarkably lucky position of withdeawing £50K and the pot still growing then we would chose to pay higher rate tax at 40% over a few years rather than pay LTA I think.
But also I think stopping work if you are that way inclined (as most people are).

anselld

jdl920p said:

I was going to start a new thread, but this seems to a good place to ask my question

If I breach the LTA and take my pension as income is the 25% extra tax on the income a one-off tax charge for the first year or is it charged every year?  I can't seem to find a definitive answer on this

The 25% is taken when you crystalise funds above the LTA into drawdown (which is a on-off event).

There is further income tax at your normal rate when you actually take the income.  20% / 40% / 45% etc.

kuratowski

Yes but there's nothing to stop you from crystallising one part of a pot today, and then another part later on, so it could be a one-off event that occurs several times.  The same £ will never be hit with a lifetime allowance charge twice, although as lisyloo says, the growth on those undrawn £ will potentially be subject to another charge at age 75.