Setting me straight on the LTA (Once again)

Pat38493

EdSwippet said:

Albermarle said:

There has been speculation in past threads, that you can forgo the tax free cash and leave it in the pension. If it were technically possible, which is not really clear, it would in most cases be a bad idea ...

Interactive Investor at least seems relatively clear that leaving tax-free cash on the table is an option. Step 7 of their instructions for SIPP flexi-access drawdown reads:

Next, enter how much of your pension you would like to take as a tax-free lump sum (up to 25%). Enter ‘0’ if you don’t want to take a lump sum.

I don't know what they do if you enter anything other than 25% (and I'm certainly not planning to try it and see!). I would hope they at least query and confirm it, since as you say, anything other than 25% is almost certainly user error; if not taken now, then never.

Is it possible that they track it as tax free cash not yet withdrawn i.e. same status as inherited money if you die before 75?  Or would that not be allowed?

RogerPensionGuy

Pat38493 said:

RogerPensionGuy said:

Workerdrone said:

Apologies. I know this has been done to death, but the more articles and posts I read on it the more I keep wondering if I have the wrong end off the stick.

Here's my intention. At 60 to be around the LTA. I will crystallise the lot, keep 100k in cash inside the pension wrapper to guard against a few years of poor markets and stick the rest into something like a VLS 60:40.

So nice and simple. I have crystalised 100% of my LTA.

So my intent is to die with my pension pot full to pass on to the kids, but still to draw from it during retirement. Perhaps I am wrong but I regard the LTA as the goose which lays the golden eggs. i.e I can keep drawing cash out of the crystallised funds and won't have any LTA charge to pay as long as the total balance of the pot stays below the LTA at the point I crystallised it.

Say I had a very good 10 year run and VLS 60:40 returns 10% every year. I draw 90k a year out. After 10 years I have now drawn 900k out but I still have £1m in the pot. 100k cash + 900k in VLS. So my pot has given me £1.9m, but I've never needed to pay an LTA charge.

Am I right, is it really the golden goose which keep laying.

None of the examples I read of specifically target a person who wants to tread the line between keeping a pension pot almost full, but below LTA.

I think your about correct as I understand it, however I'm now 90% sure they will adjust a few pension rules on the next budget 15th March. 

To note the BCE that can occur at age 75 looks at the figures at that time, so pot could get to 2M at age 70 and if you vented to say 1M by 75, no LTA payable at BCE @ age 75.

My guess is LTA will be increased and geared to a sensible index.

AA go down ro 30K or the like.

AA for people with pots over 1M maybe reduced.

Input tax relief maybe all at 30%

MPAA figure with be increased.

☆☆☆☆☆☆☆☆☆☆☆☆

If they want to entice more people back to work to help reduce inflation, they will need to clear up some pension cliffedges and make The New Pension Freedoms fit for purpose in these times, most of all make pensions much more easy to understand and I hope they confirm any negative changes cannot be made without at least 10 years notice.

What makes you 90% sure of that?  

Particularly the part about input tax relief all at 30% - if you mean everyone gets 30% relief on all contributions regardless of marginal tax rate, I suspect this would require major changes to IT systems which would take a long time as it’s a fundamental change, and it might require primary legislation?

The elegance of the current system is that it can be thought of as “nobody pays any income tax on the contributions they make to pensions on the way in but only on the way out” .  If you unlink this and effectively create a unique relief rate for pensions, I think opponents will say that they want to tax you twice on your same money.

I think because they didn't extend the freeze or increase taxing on pensions in the last budget and they did change and extend other stuff from 2026 to 2028 he is clearing the path for adjusting pension stuff in the next budget 15th March.

I only read plenty of press reports saying LTA will be increased, I don't read anyone saying the LTA will be held or freeze extended.

Apart from the LTA, I am thinking they will adjust other pension stuff hopefully keeping older people working longer or re-starting work and hoping this will help control inflation in the UK.

Time will tell. 

https://www.ii.co.uk/analysis-commentary/chancellor-jeremy-hunt-gives-thought-55-pension-tax-charge-ii526753#:~:text=Jeremy Hunt is considering increasing,with a 55% tax charge.

Pat38493

RogerPensionGuy said:

Pat38493 said:

RogerPensionGuy said:

Workerdrone said:

Apologies. I know this has been done to death, but the more articles and posts I read on it the more I keep wondering if I have the wrong end off the stick.

Here's my intention. At 60 to be around the LTA. I will crystallise the lot, keep 100k in cash inside the pension wrapper to guard against a few years of poor markets and stick the rest into something like a VLS 60:40.

So nice and simple. I have crystalised 100% of my LTA.

So my intent is to die with my pension pot full to pass on to the kids, but still to draw from it during retirement. Perhaps I am wrong but I regard the LTA as the goose which lays the golden eggs. i.e I can keep drawing cash out of the crystallised funds and won't have any LTA charge to pay as long as the total balance of the pot stays below the LTA at the point I crystallised it.

Say I had a very good 10 year run and VLS 60:40 returns 10% every year. I draw 90k a year out. After 10 years I have now drawn 900k out but I still have £1m in the pot. 100k cash + 900k in VLS. So my pot has given me £1.9m, but I've never needed to pay an LTA charge.

Am I right, is it really the golden goose which keep laying.

None of the examples I read of specifically target a person who wants to tread the line between keeping a pension pot almost full, but below LTA.

I think your about correct as I understand it, however I'm now 90% sure they will adjust a few pension rules on the next budget 15th March. 

To note the BCE that can occur at age 75 looks at the figures at that time, so pot could get to 2M at age 70 and if you vented to say 1M by 75, no LTA payable at BCE @ age 75.

My guess is LTA will be increased and geared to a sensible index.

AA go down ro 30K or the like.

AA for people with pots over 1M maybe reduced.

Input tax relief maybe all at 30%

MPAA figure with be increased.

☆☆☆☆☆☆☆☆☆☆☆☆

If they want to entice more people back to work to help reduce inflation, they will need to clear up some pension cliffedges and make The New Pension Freedoms fit for purpose in these times, most of all make pensions much more easy to understand and I hope they confirm any negative changes cannot be made without at least 10 years notice.

What makes you 90% sure of that?  

Particularly the part about input tax relief all at 30% - if you mean everyone gets 30% relief on all contributions regardless of marginal tax rate, I suspect this would require major changes to IT systems which would take a long time as it’s a fundamental change, and it might require primary legislation?

The elegance of the current system is that it can be thought of as “nobody pays any income tax on the contributions they make to pensions on the way in but only on the way out” .  If you unlink this and effectively create a unique relief rate for pensions, I think opponents will say that they want to tax you twice on your same money.

I think because they didn't extend the freeze or increase taxing on pensions in the last budget and they did change and extend other stuff from 2026 to 2028 he is clearing the path for adjusting pension stuff in the next budget 15th March.

I only read plenty of press reports saying LTA will be increased, I don't read anyone saying the LTA will be held or freeze extended.

Apart from the LTA, I am thinking they will adjust other pension stuff hopefully keeping older people working longer or re-starting work and hoping this will help control inflation in the UK.

Time will tell. 

https://www.ii.co.uk/analysis-commentary/chancellor-jeremy-hunt-gives-thought-55-pension-tax-charge-ii526753#:~:text=Jeremy Hunt is considering increasing,with a 55% tax charge.

I guess from a government point of view they have to try to figure out the general average consequences of decisions.  To be honest, for my personal situation, if the AA was changed to a flat 30K for everyone and input tax relief to flat 30%, it would probably reinforce or even accelerate my retirement date rather than change it later.  However, everyone is different and I guess they have to cater for the general approach accepting that there will be some counter effect.

RogerPensionGuy

https://www.youtube.com/watch?v=AMJ8Ya3CPj4&t=213s

.https://www.youtube.com/watch?v=vQXd_xdgqxY
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Reading this thread, maybe these links above could be of interest to some.