TFLS from two pensions that exceed my LTA ?

dunstonh

My understanding is that if you exceed the lifetime allowance then any lump sum after that is taxed at 55% and is NOT tax-free is this the case?

Correct.  But there could be a big jump between the LTA used which could bring the LTA level down (possibly below the threshold - we don't have figures).  Or there could be very little and it would not make any difference.  I had one earlier in the year where the LTA use was 10% lower and it was the difference between being under and being over.

marlot

kbundy said:

I am 58 and I have two pensions to take at 60, one is a final salary the other is a SIPP which over the years has done VERY well, the combined value take me well over the Protected lifetime allowance

When I take the pensions would it be better to take the tax-free lump sums from both pensions to ease the tax burden, than taking both pensions?

Is it worth taking the DB pension early?  Reducing the LTA charge can be a good reason to take it now with an actuarial reduction.

zagfles

dunstonh said:

My understanding is that if you exceed the lifetime allowance then any lump sum after that is taxed at 55% and is NOT tax-free is this the case?

Correct.  But there could be a big jump between the LTA used which could bring the LTA level down (possibly below the threshold - we don't have figures).  Or there could be very little and it would not make any difference.  I had one earlier in the year where the LTA use was 10% lower and it was the difference between being under and being over.

That would imply a terrible commutation rate, if the LTA used is significantly reduced by taking the max TFLS. I find it hard to believe it's worth accepting a rubbish commutation rate to get below the LTA threshold, even if the actuarial reduction to the DB to pay the LTA charge uses the same factor. Except maybe in the case of someone with low life expectancy, but then a full transfer is likely to be a better option even with the extra LTA.

zagfles

marlot said:

kbundy said:

I am 58 and I have two pensions to take at 60, one is a final salary the other is a SIPP which over the years has done VERY well, the combined value take me well over the Protected lifetime allowance

When I take the pensions would it be better to take the tax-free lump sums from both pensions to ease the tax burden, than taking both pensions?

Is it worth taking the DB pension early?  Reducing the LTA charge can be a good reason to take it now with an actuarial reduction.

Indeed - this could be a better option if early retirement factors are reasonable