How many people actually get to the LTA?

RSTime

Is there any data on how many people get to the LTA? I appreciate that number will increase as long as it is frozen.

Dazed_and_C0nfused

This is probably as good as it gets.

In particular table 8.

https://www.gov.uk/government/statistics/personal-and-stakeholder-pensions-statistics

Silvertabby

It's much harder to reach LTA with a DB scheme due to the way they are valued:  20 X annual pension plus 1 X lump sum.

A DB pension of £40K plus a tax free lump sum of £250K just sneaks in - but the amount of DC pot needed to match this as an annuity would likely be well over £2M.

marlot

Silvertabby said:

It's much harder to reach LTA with a DB scheme due to the way they are valued:  20 X annual pension plus 1 X lump sum.

A DB pension of £40K plus a tax free lump sum of £250K just sneaks in - but the amount of DC pot needed to match this as an annuity would likely be well over £2M.

Very true. and the 20x is hard to justify.

But there are significant flexibilities on how a DC pot can be used and passed down to family etc.

I consider myself very fortunate to have a mix of the two.

HeyYeah

In the 'ii 2022 Show me my money' survey, it shows 1% of people have a pension that exceeds £1,000,000. Interestingly, of the people in this category, none surveyed were women.

Also only 19% of people had a pension over £100k.

DT2001

marlot said:

Silvertabby said:

It's much harder to reach LTA with a DB scheme due to the way they are valued:  20 X annual pension plus 1 X lump sum.

A DB pension of £40K plus a tax free lump sum of £250K just sneaks in - but the amount of DC pot needed to match this as an annuity would likely be well over £2M.

Very true. and the 20x is hard to justify.

But there are significant flexibilities on how a DC pot can be used and passed down to family etc.

I consider myself very fortunate to have a mix of the two.

I assume that the 20x calculation was quite simplistic as it applies equally to all elements of your pension i.e. any GMP whether it increases by CPI or not all or non GMP element increasing by CPI, RPI, capped or not. So with high inflation a GMP pension element with no increases is too highly valued at 20x and a pension with no RPI cap too low. All said something simple relating to pensions is better?

If you draw a DB pension at NPA (60) you are given a figure for LTA what happens at 65 when you get an increase as a result of the GMP being recalculated? At SPA by pension decreases…..
It will not affect me as I’m well below the limit however I was just wondering.

Grumpy_chap

HeyYeah said:

Also only 19% of people had a pension over £100k.

What does that mean?

19% of people have £100k or more pension pot /  value at retirement age?

19% of all people have £100k or more pension pot / value when considering the entire population over 16 yo?
A 16 yo in first job and NNW will only have a small pension pot.
Final years in nursing home with all the money spent also left with a small pension pot.

OR 19% of something else entirely?

Ksw3

DT2001 said:

marlot said:

Silvertabby said:

It's much harder to reach LTA with a DB scheme due to the way they are valued:  20 X annual pension plus 1 X lump sum.

A DB pension of £40K plus a tax free lump sum of £250K just sneaks in - but the amount of DC pot needed to match this as an annuity would likely be well over £2M.

Very true. and the 20x is hard to justify.

But there are significant flexibilities on how a DC pot can be used and passed down to family etc.

I consider myself very fortunate to have a mix of the two.

I assume that the 20x calculation was quite simplistic as it applies equally to all elements of your pension i.e. any GMP whether it increases by CPI or not all or non GMP element increasing by CPI, RPI, capped or not. So with high inflation a GMP pension element with no increases is too highly valued at 20x and a pension with no RPI cap too low. All said something simple relating to pensions is better?

If you draw a DB pension at NPA (60) you are given a figure for LTA what happens at 65 when you get an increase as a result of the GMP being recalculated? At SPA by pension decreases…..
It will not affect me as I’m well below the limit however I was just wondering.

If your pension is increased at a later date and the increase is above a permitted maximum then another benefit crystallisation event occurs and the amount above the permitted maximum is tested against the LTA and you will be given a new total % used by the scheme. 

hugheskevi

DT2001 said:

I assume that the 20x calculation was quite simplistic as it applies equally to all elements of your pension i.e. any GMP whether it increases by CPI or not all or non GMP element increasing by CPI, RPI, capped or not. So with high inflation a GMP pension element with no increases is too highly valued at 20x and a pension with no RPI cap too low. All said something simple relating to pensions is better?

Back in 2010, the Government Actuary's Department advised on setting the Annual Allowance factor. As part of that report they noted:

The factor of 16:1 replaces the previous factor of 10:1, though much of the increase is due to the change in the definition of the increase in pension to which the factor is applied. The new factor may also be compared to the 20:1 currently used in the Lifetime Allowance test. The 20:1 factor is applied at retirement. Using the same assumptions as were used to derive the 16:1 factor recommended in this report, the equivalent factor on retirement at age 60 would be 23.6:1 and at 65 would be 22.2:1. That is, I am effectively assuming that pensions are more valuable than implied by the existing 20:1 Lifetime Allowance factor, since I am assuming higher life expectancy and lower discount rates. In my opinion, this seems appropriate compared to the position of 5 to 10 years ago when the previous factors were adopted.

Albermarle

Grumpy_chap said:

HeyYeah said:

Also only 19% of people had a pension over £100k.

What does that mean?

19% of people have £100k or more pension pot /  value at retirement age?

19% of all people have £100k or more pension pot / value when considering the entire population over 16 yo?
A 16 yo in first job and NNW will only have a small pension pot.
Final years in nursing home with all the money spent also left with a small pension pot.

OR 19% of something else entirely?

Does it include defined benefit schemes, or some equivalent value for them , as this would skew the figures a lot?

Albermarle

Silvertabby said:

It's much harder to reach LTA with a DB scheme due to the way they are valued:  20 X annual pension plus 1 X lump sum.

A DB pension of £40K plus a tax free lump sum of £250K just sneaks in - but the amount of DC pot needed to match this as an annuity would likely be well over £2M.

Probably comparing directly with a current  annuity is not entirely correct . The annuity rates are improving and as already said the DC pot also has some advantages as well as disadvantages. Comparing it to a typical CETV transfer value is probably more accurate .
So the £40K + £250K DB pot ( £1.05M LTA) could be compared to say a £1.6 M DC pot , although it is only an opinion.