LTA allowance exceeded at 36

cfw1994

Diplodicus said:

You would be mad to trim in view of a potential tax bill in 2060.

You have a million £ investment you can grow in a tax-free environment for the next half of your life. Just keep going. 

Don't hire a financial adviser. 

On the one hand, I would say my 36-yr old self might have benefited from some sage fiscal advice had I “come into £1M+”🤓

On the other, I find I am a little agreement with our Dino friend here: you have managed to accumulate a very decent sum on your own - why give away a huge future sum away to advisors who would (to exaggerate the point) happily leech off your future wealth growth with a steady drip 🧐

You've wisely got 5 meetings coming up.  Well done on accumulating at an early age what many even here would only dream of 🎉

Learn what you can from them: maybe the EIS or VCT areas could be of interest, but unless there is one you clearly feel can offer you some real help & add value to your life over the next 20-30+ years, crack on managing your own funds.

If you have excess cash available to invest….invest in experiences whilst you are young.  Go to festivals, travel, heck, buy an electric car and a V8 for fun - live a little 😜👍

My main suggestion, through some “interesting” past experience, would be to never invest in something you do not understand.   Money doesn’t need to be over complicated….but some feel it should be, or that there is some magic sauce they are missing.  If the simplest thing is to crack on with ISA and pensions (aided by company payments, presumably), do that 😎👍

ukdw

PdPaul said:

With regards upgrading the asset classes, yes that is my thoughts on it, take out an interest only mortgage on a 1.2million property, then in 25years when I can get my pension, which should have tripled I can pay it off with the 25% tax free lump. Biggest risk with that is a change in interest rate on such a large sum.

Don't forget stamp duty - which is 10% above £925k - that's could be the equivalent of up to half of your interest payments over 20 years.

Albermarle

With regards to wife, I have read some information about that transfer of pension so I can effectively use 2 x LTA - obviously that comes with its own risks, but certainly a good move if this is legitimate advice when married.

You can not transfer pensions between different people , even with your wife .

What you can do is give her money to put in her own pension . However to do this and claim tax relief she needs to be earning an appropriate amount of taxable income .

elouise01582

I have heard anecdotal stories that married couples have divorced so that the one with the lower pension gets a pension sharing order credit and then both parties are under the lifetime allowance limit.  I don't know if anyone has actually done this though. Seems a bit extreme.

QrizB

elouise01582 said:

I have heard anecdotal stories that married couples have divorced so that the one with the lower pension gets a pension sharing order credit and then both parties are under the lifetime allowance limit.  I don't know if anyone has actually done this though. Seems a bit extreme.

Not quite as extreme as that, but Mrs QrizB is a self-employed artist and her profits are so low that she's limited to £3600 pa gross pension contributions. I'm wondering about buying enough of her art myself to bring her profits up towards £9560 so she can build a bigger pension without paying Class 4 NI.

Notepad_Phil

elouise01582 said:

I have heard anecdotal stories that married couples have divorced so that the one with the lower pension gets a pension sharing order credit and then both parties are under the lifetime allowance limit.  I don't know if anyone has actually done this though. Seems a bit extreme.

Yes I've heard similar stories too, but the ones I hear usually end up with the other party deciding that they quite enjoy being divorced with a nice big pension to spend.

MaxiRobriguez

If I was 36 and hit £1m in the portfolio I'd be looking at alternative vehicles to invest in, not because of tax implications, but because of accessibility changes. Frankly your pot is already big enough to retire early on so the biggest risk is if the government of the day added on say ten years to accessibility to match the state pension age.

So on that basis I'd be looking at vehicle diversification whilst you're still in the accumulation phase: S+S ISA, unwrapped products, B2L maybe. 

Malthusian

elouise01582 said:

I have heard anecdotal stories that married couples have divorced so that the one with the lower pension gets a pension sharing order credit and then both parties are under the lifetime allowance limit.  I don't know if anyone has actually done this though. Seems a bit extreme.

It is entirely possible that no-one has ever done it.

• You risk losing half the pension and half of all other assets for the sake of trying to avoid a tax charge of a percentage of the excess over the LTA only.
  
• It requires both of you committing perjury and tax fraud. (You have to lie to a court that the marriage has broken down before they will grant the divorce.)
• To have any hope of avoiding prosecution and/or an investigation by HMRC, you and your ex have to genuinely live apart for several years in order to plausibly fake a genuine breakdown followed by unforeseen reconciliation. The cost of running an extra household for several years is likely to eat into any tax saving. If you love your spouse you wouldn't countenance being apart for several years and if you don't you are highly likely to find they use their newly eligible bachelor/ette status to nab an upgrade.
  

Someone in another thread however did tell a plausible story of a fake divorce around 30 years ago in order to secure higher benefits under the old State Pension system, which was never caught. (More plausible because it involved less money, and they may not have had any pension / assets to risk losing.)

wjr4

How much have you got in cash savings and S&S ISAs?

jamesd

The usual place to go when pensions investing is no longer suitable is venture capital trusts, maybe also Enterprise Investment Scheme or its SEIS companion.