Should I go over the SIPP lifetime allowance?

cfw1994

Tinten said:

I thought I had got it, but you say I haven't. I had said that PCLS is something that can be done more than once ("multiple times"), by which I meant each time I want to crystallise more of the SIPP. In other words PCLS is not a once only 25% payment only at the start of accessing your pension for the first time.

You say this is wrong and PCLS happens only at the start. But then your illustration is of multiple PCLS crystallisations. 

I can't see how your illustration is different from my description of the process. What's the subtle difference I am missing?

Just on this little point in bold. 

You will sometimes see the PCLS referred to as the TFLS (Tax Free Lump Sum), or sometimes TFC (Tax Free Cash)   

Perhaps that is better at explaining why you can have many instances of PCLS 😉👍

EdSwippet said:

Thrugelmir said:

EdSwippet said:

Thrugelmir said:

jamesd said:

Why would being in a downturn be a bad time to crystallise? It's the best of times. You use less of the lifetime allowance while crystallising and then get the benefit of any recovery growth on the 25% outside the pension instead of where it'll increase lifetime allowance usage. The mere fact of crystallising doesn't change your investments, you just buy the same things with the 25% after crystallising if you don't want to spend any money. And since they are the same things, they recover in just the same way as if they had been inside the pension.

Crystallising also doesn't reduce tax free cash. Again, just invest in the same way and you get exactly the same amount tax free, just grown inside the ISA or wherever instead of continuing to be grown inside the pension. There can be differences due to tax inefficiency of some investments outside a pension until moved into an ISA, though.

Then logic suggests that one should exceed the LTA by a margin and wait for the downturn. Average historic downturn in a bear market is 36%. A fund could be worth £1,675,000 and still remain within the allowance. 

Huh? Can you explain? I'm struggling to see how logic led you to this conclusion. Rather than exceeding the LTA and then waiting to catch a downturn, it is far better to crystallise on the way up, and right at the point where the pension hits the LTA.

What you suggest seems to be equivalent to deliberating missing your desired bus stop, going two or three past, getting off the bus there, crossing the road, and then waiting for an unreliable and potentially cancelled bus going the other way to take you back to where you wanted to be in the first place.

I agree it's easier to catch a bus than a downturn. Though they both share the same trait of being unreliable. When you least expect it. 

I remain mystified by your earlier logic. I am now also mystified as to why you felt posting the above as well offers any useful contribution to the discussion.

Some posters here add value; others spread FUD (fear, uncertainty, doubt).
Always focus attention on the former 😉
(you helped me understand the LTA a couple of years back - thanks!)

Timing things with pensions is a total minefield.  My relatively modern Aviva plan takes around 7 working days from me sending them the paperwork to an action…

The only things that were clear to me:
1. If you are likely to nudge the LTA, then crystallising it and investing the TFLS elsewhere *should* help you in the future. (caveat - but is no longer IHT-free).
Perhaps invest some to Premium Bonds to be able to easily withdraw when needed, the rest perhaps in S&S ISAs.  Those ISAs should likely be your ‘riskier’ (more volatile) investments - you can be happy for that to grow in the long term, where you might want the remaining pension fund to be steadier.  

2. Keeping the growth down (by withdrawing it) in the then-crystallised sum left is likely to help with the punitive second LTA test at 75.

Bear in mind I am only just ‘retired’, having done a few TFLS BCEs for the reasons above.  I can say, now 2 years after the first, that the growth would have taken me well over the LTA!

Nobody here has a crystal ball, so you can only do the best you can!
Remember, it’s only money, & if the LTA is a problem, it is a luxury First World problem to have 😜👍