LTA allowance exceeded at 36

PdPaul

Hi all,

I've now exceeded my LTA and only 36. What's the best advice although I know we don't know how things can change in over 20years. 
I think I'm right in thinking that I don't pay any tax on it whilst it is sitting invested, it's only when I come to access it. 
I was wanting to make a donation to charity but it looks like that is also a No. Advice appreciated.

Essex_Traveller

If you have not used up your ISA allowance, I would start using that up - other than that, I would probably continue to throw it at the pension. The outcome is you pay tax, its not a hard stop threshold.

And no you don't pay tax until you start to draw from it (caveat: as things stand today).

Malthusian

PdPaul said:

Hi all,

I've now exceeded my LTA and only 36. What's the best advice although I know we don't know how things can change in over 20years. 
I think I'm right in thinking that I don't pay any tax on it whilst it is sitting invested, it's only when I come to access it.

And at age 75.

Essex_Traveller said:

If you have not used up your ISA allowance, I would start using that up - other than that, I would probably continue to throw it at the pension. The outcome is you pay tax, its not a hard stop threshold.

No, the outcome is you pay tax twice. That is bad advice unless the OP wants to pay voluntary tax (which we can assume he doesn't as he was asking whether he could donate to charity instead of the Treasury).

It can be worthwhile to pay contributions while over the LTA if the alternative is to lose the money completely (e.g. matching employer contributions) and/or the benefits are generous enough to compensate for the extra tax (e.g. defined benefits scheme). Otherwise there's a good chance you will pay more tax to get the money out (including the LTA charge) than you get tax relief on the way in.

QrizB

PdPaul said:

Hi all,

I've now exceeded my LTA and only 36. What's the best advice although I know we don't know how things can change in over 20years. 
I think I'm right in thinking that I don't pay any tax on it whilst it is sitting invested, it's only when I come to access it. 
I was wanting to make a donation to charity but it looks like that is also a No. Advice appreciated.

Congratulations on your £1M pension pot.

Do you have a wife/husband/partner/significant other that you expect to still have as wife etc. in 21 years time? How is their pension provision? You could contribute to theirs instead, or re-balance your pension contributions to achieve the same effect (you'll lose your tax advantages but they will gain some in return).

SouthCoastBoy

If it was me I would most probably move into a different asset class, buy a bigger house/better location, borrow the money at low interest rates and hopefully over 20 years you would see capital growth on the house which would be free of any tax. If there is an employer that is contibuting to your pension I would still be taking that free money.

Not advice just my thoughts on what I would do.

Thrugelmir

PdPaul said:

I've now exceeded my LTA and only 36. What's the best advice although I know we don't know how things can change in over 20years. 

What was the secret of your successful investment strategy? 

Albermarle

PdPaul said:

Hi all,

I've now exceeded my LTA and only 36. What's the best advice although I know we don't know how things can change in over 20years. 
I think I'm right in thinking that I don't pay any tax on it whilst it is sitting invested, it's only when I come to access it. 
I was wanting to make a donation to charity but it looks like that is also a No. Advice appreciated.

You can only add £40K pa , so you must have started early !

Cus

What I do is pay in whatever my employer matches subject to the tapering allowance, as the saving of 45% tax plus free money from my employer makes it more than worthwhile even with LTA tax. 
You could also see if your employer will allow an ISA type payment instead.

LTA is a number not a limit. Also some often say that you should de-risk the sipp but I don't agree with that.
When you take your 25% tax free in 20 years you can give it to charity.

EdSwippet

Emigrate from the UK, and so become eligible for contributions to a pension in your new country, but now free of the limitations of the LTA?

For extra credit, you could consider a QROPS transfer of your UK pension to your new country. This is a 'Benefit Crystallisation Event', BCE 8, so you would pay the LTA penalty immediately on the balance above the LTA. However, you would then be completely immune from all future BCEs, including the spiteful BCE 5 at age 75. Also, immune from any future moving of pension goalposts by the UK govt.

Suggested only half-jokingly ...

elouise01582

Have you considered a LISA.

Albermarle

elouise01582 said:

Have you considered a LISA.

  And have you checked your state pension forecast