Ooh, Time to Start Speculating About LTA Changes Again

Pat38493

EdSwippet said:

Don't confuse the use of 'lump sum' withdrawal when above-the-LTA with the PCLS 'lump sum'. They refer to different things, and it's unfortunate that the government chose to re-use term in two somewhat different ways. For PCLS, the 'lump sum' is 25% of the amount crystallised. For LTA purposes, a 'lump sum' is just a pension withdrawal made when there is no remaining LTA percentage.

Also, recall that 'crystallising' a pension means moving money into drawdown and then either taking 25% tax free (if below the LTA), or handing that entire 25% to the government (if over the LTA), and designating the remaining 75% for withdrawal. The actual taxable withdrawals on that 75% might happen much later than the crystallisation event. This provides a planning opportunity to jump the LTA hurdles early and so defuse some LTA issues, but without having to immediately draw taxable money from the pension. That can buy breathing space between age 55 (soon 57) and the unavoidable forced LTA test at age 75.

Thanks - this also helps because I think I was confused by the use of "lump sum" - I didn't really understand that this term has a particular very specific meaning when you are above the LTA.

saucer

Telegraph today predicting that LTA freeze, rather than being brought forward, will move back to 2027. 

Albermarle

saucer said:

Telegraph today predicting that LTA freeze, rather than being brought forward, will move back to 2027. 

Like all these  scary articles about LTA , a quick read through by someone not familiar with this area, would give you the impression that Millions of pensioners were about to lose 55% of their pension overnight. 

saucer

Albermarle said:

saucer said:

Telegraph today predicting that LTA freeze, rather than being brought forward, will move back to 2027. 

Like all these  scary articles about LTA , a quick read through by someone not familiar with this area, would give you the impression that Millions of pensioners were about to lose 55% of their pension overnight. 

I know. First world problems for those affected. 

valueman1

If I am about to hit the LTA and I am over 55, should I just go into drawdown at that point to protect my position?

Albermarle

valueman1 said:

If I am about to hit the LTA and I am over 55, should I just go into drawdown at that point to protect my position?

This is sometimes mentioned as a strategy in the many threads that have discussed the subject.
However a couple of things to note .
You have to find a home for the 25% tax free. Normally you would reinvest it, but this could mean paying some capital gains tax and dividend tax.
You need to make sure that all growth in the remaining 75% crystallised pot is withdrawn before you are 75 ( should not be difficult) 

Mick70

almost almost guaranteed to be frozen for another 3-5 years IMO

Pat38493

Mick70 said:

almost almost guaranteed to be frozen for another 3-5 years IMO

Probably it will be frozen permanently and then once the majority start being impacted by it in a decade or two, it will be "in order to simplify the system you might as well just pay the tax before the money goes in".

Altior

Surely the solution is to make it less punitive to breach the LTA, and treat it more like a threshold than a hard cap. So for example, income over the excess has a an additional tax charge of 5%. Almost a win/win, as it's not a big enough cliff edge to make people stop working, and the treasury would likely have some additional revenue. 

cfw1994

valueman1 said:

If I am about to hit the LTA and I am over 55, should I just go into drawdown at that point to protect my position?

That’s a debatable point.  I did, but it depends on your view of the future and what use you can make of the money you would be drawing down: inside the DC pot means it is outside of the estate, protected from IHT.   Were you aware of that?

How has the research gone into the family investment company to lock that money from your offspring for a decade or two?