Exceeded LTA

Thrall

Greetings all.

Having reached 66 earlier this year was expecting to continue working until end of 2022 (if only to savour the lack of NIC...). Employer knew of this so somewhat surprised to be made redundant.

Stupid corporate headcount reduction games trumped the cost of paying me off a whole 3 months before I was going to go anyway. (I looked sad and did manage not to laugh)

Right, better get the pension stuff sorted.

Already had one DB pension in payment for about 10 years when I tried early retirement at 56. Got bored after 12 months and back to work but at least had managed to latch on the £1.5m LTA and burned up a chunk of that, which as it turns out was just as well

After a battle with bureaucratic indolence surfaced details on two other DB pensions and.....95.25% of LTA used. So about £52K left

Next, the ragbag of DC Pension arrangement picked up over the years, some very old.

Had pretty much ignored and filed the constant drizzle of impenetrable letters so bit of an exercise to find then get updated values but eventually got there

Provider A:           £26.2

Provider B:           £48.7 (this is old and has guaranteed benefits)

Provider C:           £59.4

 

So £82k above LTA.

Couple of discussions with so called IFA’s later and left with:

(i)             utterly worthless and self serving suggestion to consolidate everything into new arrangement and earn them a rich commission and ongoing platform fee

(ii)            Given the “complexity” of my arrangements fee based advice, estimated at a minimum £2.5k ( +VAT of course) not forgetting any Commissions and fees that might flutter in

To me bringing B into payment is first step as it is covered by remaining LTA leaving £3k

So most of rest, a 25% charge as I don’t need lump sums

Grateful for any thoughts or suggestions.

Also not clear on what happens in terms of Self Assessment which I do every year: understand details need to be submitted to HMRC but does that trigger any secondary tax impacts?  

Albermarle

Couple of discussions with so called IFA’s later and left with:

(i)             utterly worthless and self serving suggestion to consolidate everything into new arrangement and earn them a rich commission and ongoing platform fee 

This is normal. Your older pensions may be  out of date, expensive and lacking in flexibility with poor websites etc.

 IFA's have not been allowed to charge commission for many years, and the platform fee is to pay the platform. You are currently paying three lots of fees for your current pensions. AS they are quite old the fees are probably quite high.

(ii)            Given the “complexity” of my arrangements fee based advice, estimated at a minimum £2.5k ( +VAT of course) not forgetting any Commissions and fees that might flutter in

As said commissions are not paid anymore, you are paying the full cost of the advice upfront ( £2.5K) 

Anyway, probably for the older pensions, you will find withdrawal options very limited, so this needs checking.

Often they need to be transferred out to a new pension, to give more flexibility.

dunstonh

Couple of discussions with so called IFA’s later and left with:
(i)             utterly worthless and self serving suggestion to consolidate everything into new arrangement and earn them a rich commission and ongoing platform fee

IFAs are not allowed to receive a commission.   So, that would suggest that they were not IFAs.   Strictly speaking, FAs are not allowed to receive commission either.  However, several larger FA firms have remuneration methods that look exactly like commission.  Vertically integrated firms can get away with it (Vertically integrated is where the adviser, provider and funds are all in-house).  However, they are not IFAs.

And in the vast majority of cases, it is normal to consolidate legacy plans with limited or no drawdown functionality onto a modern plan that does.   Plus, in most cases, the charges are lower on the plans the IFAs would use compared to legacy plans set up in days when charges were higher.   So, completely logical and correct.

(ii)            Given the “complexity” of my arrangements fee based advice, estimated at a minimum £2.5k ( +VAT of course) not forgetting any Commissions and fees that might flutter in

Again, there is no commission and VAT should not be coming into this as intermediation is non-Vatable unless there is no intention to buy a financial product.

Grateful for any thoughts or suggestions.

Perhaps you should see an IFA.  Apart from that, there is insufficient information in your post to give any thoughts or suggestions.

MallyGirl

I know you said that you don't need lump sums but you could maybe get A out in 3 chunks using the small pots rule - this is outside of LTA calcs

zagfles

Yes the "small pots" is something to consider - this is a loophole where if you take a pension less than £10k as a lump sum using the "small pots" rule then it doesn't count for the LTA. You get taxed as income as usual on 75% and 25% is tax free, a bit like a UFPLS. So best do it when you won't go into higher rates of tax.

None of your pots are less than £10k but I believe some providers eg HL will split your pot into 3 £10k pots (3 is the max for non-occupational pensions), so could do that with pot A. Then it's just C which takes you above the LTA.

Marcon

Thrall said:

Couple of discussions with so called IFA’s later and left with:

(i)             utterly worthless and self serving suggestion to consolidate everything into new arrangement and earn them a rich commission and ongoing platform fee

(ii)            Given the “complexity” of my arrangements fee based advice, estimated at a minimum £2.5k ( +VAT of course) not forgetting any Commissions and fees that might flutter in

To me bringing B into payment is first step as it is covered by remaining LTA leaving £3k

So most of rest, a 25% charge as I don’t need lump sums

Grateful for any thoughts or suggestions.

Also not clear on what happens in terms of Self Assessment which I do every year: understand details need to be submitted to HMRC but does that trigger any secondary tax impacts?  

So two IFAs (assuming they really were IFAs - are you sure?) have recommended similar courses of action. Bit of a coincidence unless, of course, those courses of action are indeed a sensible and measured approach to your situation, and the instructions. you gave them in terms of where you wanted to get to. If they've provided written reports, could be well worth reading them.

Pablo7474

I note you say part of it was tested against the LTA at £1.5m, what level of LTA was rest rested against? 

For later years, are you eligible for IP2016 or FP2016? 

Thrall

Marcon said:

Thrall said:

Couple of discussions with so called IFA’s later and left with:

(i)             utterly worthless and self serving suggestion to consolidate everything into new arrangement and earn them a rich commission and ongoing platform fee

(ii)            Given the “complexity” of my arrangements fee based advice, estimated at a minimum £2.5k ( +VAT of course) not forgetting any Commissions and fees that might flutter in

To me bringing B into payment is first step as it is covered by remaining LTA leaving £3k

So most of rest, a 25% charge as I don’t need lump sums

Grateful for any thoughts or suggestions.

Also not clear on what happens in terms of Self Assessment which I do every year: understand details need to be submitted to HMRC but does that trigger any secondary tax impacts?  

So two IFAs (assuming they really were IFAs - are you sure?) have recommended similar courses of action. Bit of a coincidence unless, of course, those courses of action are indeed a sensible and measured approach to your situation, and the instructions. you gave them in terms of where you wanted to get to. If they've provided written reports, could be well worth reading them.

Hence my reference to "so called IFA's".

Didn't like either of them, first a pushy gobby git who turned out to be a Restricted Adviser.

The one who wanted to charge £2.5k started blathering about "guidance not advice" when challenged and IMHO is a complete chancer. Operating via the UK branch of a Limited company, which oddly enough is incorporated somewhere sunny with palm trees. And the "UK branch" a flat in Basingstoke

Both were however listed as "IFA's" at a rubbish pre retirement seminar arranged by former employer. I have asked how that came about and following response FCA will be getting a letter

Will be dealing with an FCA registered IFA going forward

Could the Small Pots and Trivial Pension be a runner for Provider A? Thanks to mergers over the years three descrete arrangements there , two below £10k and another about £14.5K

If so have headroom to bring B into payment without breaching LTA which just leaves C

zagfles

This LITRG article explains small pots etc https://www.litrg.org.uk/tax-guides/pensioners/how-do-i-cash-my-small-pension

Or for more in-depth detail:

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm063500

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm063700

Don't assume even genuine IFAs understand the LTA well, we've seen here many don't. Another quick IFA check you can do is search for FO judgements against them, apparently most have none so might be a warning sign if they have upheld judgements against them, you can search here https://www.financial-ombudsman.org.uk/decisions-case-studies/ombudsman-decisions

Marcon

Thrall said:

Marcon said:

Thrall said:

Couple of discussions with so called IFA’s later and left with:

(i)             utterly worthless and self serving suggestion to consolidate everything into new arrangement and earn them a rich commission and ongoing platform fee

(ii)            Given the “complexity” of my arrangements fee based advice, estimated at a minimum £2.5k ( +VAT of course) not forgetting any Commissions and fees that might flutter in

To me bringing B into payment is first step as it is covered by remaining LTA leaving £3k

So most of rest, a 25% charge as I don’t need lump sums

Grateful for any thoughts or suggestions.

Also not clear on what happens in terms of Self Assessment which I do every year: understand details need to be submitted to HMRC but does that trigger any secondary tax impacts?  

So two IFAs (assuming they really were IFAs - are you sure?) have recommended similar courses of action. Bit of a coincidence unless, of course, those courses of action are indeed a sensible and measured approach to your situation, and the instructions. you gave them in terms of where you wanted to get to. If they've provided written reports, could be well worth reading them.

Hence my reference to "so called IFA's".

Didn't like either of them, first a pushy gobby git who turned out to be a Restricted Adviser.

The one who wanted to charge £2.5k started blathering about "guidance not advice" when challenged and IMHO is a complete chancer. Operating via the UK branch of a Limited company, which oddly enough is incorporated somewhere sunny with palm trees. And the "UK branch" a flat in Basingstoke

Both were however listed as "IFA's" at a rubbish pre retirement seminar arranged by former employer. I have asked how that came about and following response FCA will be getting a letter

Will be dealing with an FCA registered IFA going forward

Probably because your former employer made a mistake, so the FCA won't be interested.