Pension lifetime allowance - ways to avoid?

Albermarle

I will be happy to be corrected but, AIUI, you can still contribute (with tax relief on the way in) above the LTA or grow the pot above the LTA and the effect is that the tax on the way out counterbalances that input relief but you don't end up having paid more tax overall.

What you say is correct, as long as it is a DC pot and  you are gaining 40% tax relief on the way in and are a 20% taxpayer on the way out. This is in fact the normal scenario. Not many people will have built up a Million Pound pot, unless they were a higher earner/40% taxpayer, and only a relatively small number of retired people pay 40% tax. Then if  the pot is taken out as income rather than a lump sum , overall the tax situation is neutral. Maybe taking investment growth and inflation into account ( especially as the LTA is frozen)  you might still lose out a bit.

For DB schemes it is different. Firstly the LTA tends to be less of an issue for most , as you need a big DB pension ( in reality worth a lot more than a Million) to be affected. On the other hand some very well paid public sectors workers. like hospital consultants, can not just  stop paying into a pension as it comes automatically with the salary . AFAIUI anyway . 

NedS

Albermarle said:

For DB schemes it is different. Firstly the LTA tends to be less of an issue for most , as you need a big DB pension ( in reality worth a lot more than a Million) to be affected. On the other hand some very well paid public sectors workers. like hospital consultants, can not just  stop paying into a pension as it comes automatically with the salary . AFAIUI anyway . 

A decade of high inflation may change that. Someone (aged 57) with £25k now in an uncapped public sector CARE scheme who is 10 years from retirement will be there or thereabouts the LTA at 67 if we have a decade of high single figure inflation, even without further contributions. If they have a DC pot too, they could easily be over. Of course we do not know what will happen to the LTA over the next 10 years and whether it will remain frozen or again rise with inflation.

Albermarle

NedS said:

Albermarle said:

For DB schemes it is different. Firstly the LTA tends to be less of an issue for most , as you need a big DB pension ( in reality worth a lot more than a Million) to be affected. On the other hand some very well paid public sectors workers. like hospital consultants, can not just  stop paying into a pension as it comes automatically with the salary . AFAIUI anyway . 

A decade of high inflation may change that. Someone (aged 57) with £25k now in an uncapped public sector CARE scheme who is 10 years from retirement will be there or thereabouts the LTA at 67 if we have a decade of high single figure inflation, even without further contributions. If they have a DC pot too, they could easily be over. Of course we do not know what will happen to the LTA over the next 10 years and whether it will remain frozen or again rise with inflation.

Could be even worse if the valuation of DB schemes for LTA purposes was made more realistic.
For a DC pension holder they would need to be the LTA level now to be able to ( hopefully ) safely generate £25Kpa.