Over LTA. Do I now have some spare PCLS?

marlot

I retired.  Crystallised my DC pension and took my DBs.

I only took £168k of PCLS.  But 100% of LTA.

On the face of it, the new rules allow me to start contributing £2880 to a pension again, and take out 25% tax free.

Is that right?

ukdw

Assuming you are a 20% tax payer then the maximum benefit is £180.
I suspect if they do allow further PCLS withdrawals it won't be until the 24/25 tax year.

If the LTA 25% penalty is then reintroduced during that tax year the £180 gain would switch to a £720 loss I think.

So I guess it depends on whether the additional £50 the £180 would bring over leaving the £2,880 in a 4.5% account for a year is worth the risk of the potential £720 loss. 

leosayer

This is a timely post, I've been considering this for the past few days.

My situation is that I'm not retired but have both accrued DB and DC schemes and had been limiting my pension contributions because I was butting against the LTA.

My DB scheme pays £34k per year and allows me to take a PCLS of around £160k from my DC scheme.
My DC scheme has around £400k which, after the PCLS deduction leaves a pot of £240k from which I can take £60k tax-free.
This means I can take total tax-free cash of £220k, which is £48k short of the new tax-free cash limit.

With the abolition of the LTA I can now save a further £200k into my DC and still take 25% of it tax-free.

jaypers

I have queried this very thing with my advisor. I am retired and 100% crystallised and took tax free cash as a lump sum. When I crystallised the LTA was £1.03m. My question was whether I could take advantage of the difference with the new legislation and take another £10,750 of tax free cash. They are waiting for todays finance bill to understand the details. 

Pat38493

I am not sure if this will work, at least not in the 23/24 tax year, if you are recorded as being at 100% of LTA.

Even though the LTA charges are being abolished, you might find that you are effectively blocked from getting further tax free cash as the LTA limit is still being used to measure this.

After April 2024, I don't think anybody knows how this will work yet to this level of detail that you are describing.

Maybe someone will correct me if I'm wrong, but what I understood in the past was that your % of LTA currently "spent" caps your tax free lump sum or PCLS eligibility.

My guess would be it's the same for @leosayer - theoreticallly you should be able to do that based on what was announced, but in practice you will be blocked because they are still using the LTA system to measure this.

Albermarle

They are waiting for todays finance bill to understand the details

Seems like a good idea, as plenty of questions still as to exactly how it will work and maybe we will have to wait longer for all details.

With the abolition of the LTA I can now save a further £200k into my DC and still take 25% of it tax-free.

The LTA will remain in existence at least for tax year 23/24, just that the LTA charge will be 0%. The plan is to abolish it altogether from April 24, once suitable legislation has been passed, which will hopefully address all the potential quirks, unexpected consequences etc

leosayer

Looks like I'll have to keep an eye on this, especially if Labour get into power.

In the meantime, as a direct result of the budget I have decided to increase my salary sacrifice contributions and am planning to retire in 2025.