LTA Thoughts Please

Albermarle

Argonauts said:

LTA

the figure of over a million and 73 thousand for LTA 

is this the amount you actually take out of your pension ?
you could have more than that and start drawing your pension but not pay any more taxes ?

I sometimes get confused with pension totals up and down and climbing in next few years , so it’s the grand total before 75 of 1,073,000 pounds you take from your funds this includes the 25% part if you take this ?

your funds could fluctuate under the total and above but it’s the actual amount from them , I’ve no protection just noticed funds have almost got there .

many thanks 

To understand how LTA works, you have to understand the concept of pension crystallisation.
Assuming it is a DC pension and you have never taken any money out of your pension, then the whole amount is uncrystallised.
If this was say £800K and you wanted to take £100K as the 25% tax free cash, you have to crystallise  £400K, with the remaining 75% then taxable when you take it. This is known as a Benefit Crystallisation Event ( BCE) Then a calculation is done as follows £400,000/ £1,073,100 = 37.3% of LTA used
Remaining in your pension would be £300K crystallised and £400K uncrystallised. when you crystallise some of the uncrystallised pot another BCE occurs.
Once you reach 100% LTA, then any further withdrawals incur a charge. If you have uncrystallised funds at age 75, they automatically count towards the LTA % ( so no escape !)
It is a bit more complicated than that but that is the basic idea. If you search the forum, or google there is more info available.

MallyGirl

Argonauts said:

LTA

the figure of over a million and 73 thousand for LTA 

is this the amount you actually take out of your pension ?
you could have more than that and start drawing your pension but not pay any more taxes ?

I sometimes get confused with pension totals up and down and climbing in next few years , so it’s the grand total before 75 of 1,073,000 pounds you take from your funds this includes the 25% part if you take this ?

your funds could fluctuate under the total and above but it’s the actual amount from them , I’ve no protection just noticed funds have almost got there .

many thanks 

It is more complicated than that.
Maybe have a read of this thread that got some very useful replies:
https://forums.moneysavingexpert.com/discussion/6294316/lta-basics

Argonauts

some reply 👏👏

basically it’s 1,073,000 you take out of DC pension then it’s more tax to pay as you have used up current LTA figure

figure May go up or get lowered 

Albermarle

Argonauts said:

some reply 👏👏

basically it’s 1,073,000 you take out of DC pension then it’s more tax to pay as you have used up current LTA figure

figure May go up or get lowered 

It is not how much you take out, but how much you have crystallised. Can be that most of the crystallised part is still in the pension even when you are > 100% of the LTA

Argonauts

Crystallize 1,072,000
take out that amount ✅
pay no extra tax 

MallyGirl

Argonauts said:

Crystallize 1,072,000
take out that amount ✅
pay no extra tax 

until you turn 75 at which point the remainder is assessed against the tiny bit of LTA %age you have left and there will be tax to pay

Albermarle

Argonauts said:

Crystallize 1,072,000
take out that amount ✅
pay no extra tax 

If you withdraw it too quickly and depending on your other income, you may start to pay higher rate income tax.

Also are you aware that money left in a pension pot when you die, is not included on inheritance tax calculations. For that reason some people leave large amounts in their pension pot untouched.

Argonauts

Obviously your not going to take huge chunks out and move into higher tax brackets 

inheritance tax - leaving to kids a CV big priority ✅✅

Albermarle

Argonauts said:

Obviously your not going to take huge chunks out and move into higher tax brackets 

inheritance tax - leaving to kids a CV big priority ✅✅

There have been some 'mumblings' about changing the way pension pots are excluded from IHT calculations. Hopefully nothing will happen.
Although this link is only to a think tank, it is to a very respected one.
Death and taxes and pensions | Institute for Fiscal Studies (ifs.org.uk)