Trying to understand pension LTA?

NoMore

RogerPensionGuy said:

I still see the LTA as a massive cash collector for the HMRC and is not getting too much main stream press, I view how the LTA has jumped about these 16 years or so and the future looks unsure to me.



 

LTA tax take up 1000% in decade - FTAdviser.com

Yes increasing significantly but remember most people don't have a pension anywhere near the LTA. That's why its not in the mainstream press, it doesn't affect many but it is starting to affect more.

From the above article: "A HM Treasury spokesperson said overall, 92 per cent of individuals currently approaching retirement have a pension pot worth less than the lifetime allowance, so will not face a lifetime allowance charge, while the median pension pot for individuals approaching retirement was around £150,000."

NedS

Albermarle said:

NedS said:

zagfles said:

I doubt they'll cut the LTA in nominal terms, the current freeze is cutting it in real terms with CPI inflation at 5.1% and RPI at 7.1%

The enormity of this is just starting to sink in. The LTA was once a distant dream that was never going to bother me in a million years, but factor in 5-10 years of high inflation and a freeze on the LTA, and I'm nowhere near as safe as I once thought I was. I'm guessing it is going to catch a lot of middle earning folk unawares.

You are probably right but my guess is that inflation will not persist at these high rates but who knows.

Even with 5 years of CPI capped at 5%, and your DB pots are now 27.6% higher, not including any new accrual. 10 Years, and it's 63%.

My back of an envelope calculation say I may have around 400k of DB and £350k SIPP totalling ~750k of potential LTA (at today's values), so nothing to worry about one would think, but with ~10-13 years before NRA for the DB pensions, I may have to stay awake over my LTA and take avoiding action if required. The £400k DB LTA could easily increase to £600k with 13 years of higher inflation, and who knows what a £350k SIPP will do over 10+ years although I will be crystallising and drawing some in this time. I still don't think I'll trouble £1M at 65, but the test at 75 is not something I'd even considered, although I was hoping to leave a decent chunk of the SIPP intact for inheritance but may need to crystallise this before 75.

Thrugelmir

RogerPensionGuy said:

I still see the LTA as a massive cash collector for the HMRC and is not getting too much main stream press, I view how the LTA has jumped about these 16 years or so and the future looks unsure to me.



 

Few people benefit though. Those that do gain enormously from the tax relief on the way in. Has to be a fairness in the tax system. A £1m pension pot is perfectly adequate to live on. Which ultimately is the goal and purpose of the tax legislation. With the increasing levels of salary sacreifice schemes. The Exchequer loses out in many other ways. Main stream press will view this as a non story. How the bill for the pandemic is going to be paid will make far more headlines.