LTA: remove charge from April 2023 and abolish from April 2024

Malthusian

Sterlingtimes said:

Upon the abolition of the LTA, will SIPP providers be required to retain records of crystallisation events and notify beneficiaries annually of LTA percentages? Can this information be deleted forever?

I doubt it will ever be deleted (at least not for many decades) even if Labour don't bring the LTA back. Some pension companies are still keeping track of "protected rights" and "non protected rights" separately and that distinction was abolished in 2012 or 2016 depending on your definition. Any information of that kind attached to a pension transfer needs to be kept forever under FCA record-keeping rules (which for practical purposes means it will probably all be kept forever). 
As zagfles says, they will still need to keep some sort of record of a) how much of the cap you have used up and b) which funds you have taken TFC from and which you haven't (i.e. crystallisation events).

Sterlingtimes

zagfles said:

Sterlingtimes said:

Upon the abolition of the LTA, will SIPP providers be required to retain records of crystallisation events and notify beneficiaries annually of LTA percentages? Can this information be deleted forever?

They'll need records for the PCLS cap. They probably haven't decided how they're going to do it, they have a year to work it out.

Oh yes, that's a good point. Thank you.

andyrpsmith

I hope you don't mind but I would like to ask about LTA charge removal and where I would stand.
I retired in 2019 from the NHS with over 40yrs in pension scheme. Plus I have a small AVC pot which at todays value is £38,866.
I have used 100.67% of the LTA by taking a pension of £39,918 and a tax free lump sum of £252,090 (used a large chunk of this to get my two sons on housing ladder as most parents have to do). Also the NHS came back to me in 2022 and said I am entitled to a second bite lump sum which was £2895. So my total lump sum to date is  £255K. 
So my question is regarding the £39K avc in Scottish Widows. Can I take a further lump sum tax free (I understand the total max lump sum is £268K across all pensions, 25% of LTA?) even though I have used 100.67% of the LTA? Also taking the AVC pension now as a draw down would any LTA charge be 0%. Many thanks.

green.lander_2

Hi, just a follow on question, if LTA removed April 2024 by law does this means it can not be legally removed / altered until April 2025 at the earliest no matter what government is elected?  

Malthusian

andyrpsmith said:

So my question is regarding the £39K avc in Scottish Widows. Can I take a further lump sum tax free (I understand the total max lump sum is £268K across all pensions, 25% of LTA?) even though I have used 100.67% of the LTA? 

No. You have used up all your lifetime allowance so any further withdrawals will be taxed as income.
The 55% tax charge that would previously have applied on taking a lump sum out of a pension after using up all the LTA has been replaced with income tax at your marginal rate.

Also taking the AVC pension now as a draw down would any LTA charge be 0%. Many thanks.

Yes, but as with the above, withdrawals would be taxed as income.

green.lander_2 said:

Hi, just a follow on question, if LTA removed April 2024 by law does this means it can not be legally removed / altered until April 2025 at the earliest no matter what government is elected?  

Legally the government can do whatever it likes as long as it can get it through Parliament. Practically speaking it seems unlikely that the government would change the rules in the middle of the tax year due to the disruption it would cause (including the rush for the exits).

RogerPensionGuy

Link below just for information on this thread, it was updated 15th March 2024.

I've been lamenting on activation of pension vehicles for a good few years now, I very very nearly kicked  off my DB scheme two years ago when I wanted to mitigate TFLS effect from the DB to my DC in the future, I was very presently surprised when they announced they would effectively scrap the LTA apart from a few hangover effects like the 1.073M/268K effects.

I still don't really want to activate my DB scheme, but I have no confidence in what will occur after the next election and I can only guess with decades of higher taxes required now, they whoever will see pensions as easy pickings and the last 18 years history shows they can treat them like a football with little consequences, so I'm activating my DB just after April the 6th next month, then sit back and watch and vent my DC as I see fit over time.

I really think they should stop playing ping-pong with pensions, but I'm guessing they won't.
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https://www.gov.uk/government/publications/lifetime-allowance-guidance-newsletter-march-2024/lifetime-allowance-guidance-newsletter-march-2024

Fermion

Can someone clarify if BCE5A still payable for the 2023/24 tax year? I've read through the documentation and it seems to imply that although it will be abolished on the 6th April it's one of the few LTA criteria that still apply in the 2023/24 tax year!

(just that I turned 75 this week)

RogerPensionGuy

Fermion said:

Can someone clarify if BCE5A still payable for the 2023/24 tax year? I've read through the documentation and it seems to imply that although it will be abolished on the 6th April it's one of the few LTA criteria that still apply in the 2023/24 tax year!

(just that I turned 75 this week)

I just tried to research this and just got confused.com

I thought in year 2023/2024 LTA data has to be collected and operated as normal, but importantly there is no charges applied.

From 6th April 2024 I think LTA/1.073M/268K % Used Consumed is still collected to ensure people can only get their allowance LTA, some people will have 1.8M, 1.5M & 1.25M or the like if they have them various protections. 

But importantly no LTA charges from the 6th April2023 I think.

Below is a link possibly helpful. 
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https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm088650#:~:text=Top of page-,BCE 5A: age 75 having previously designated funds as drawdown,BCE 4 would have occurred)