Currently over LTA, should I activate DB scheme before or after 6th April 2024?

RogerPensionGuy

Currently have a DB and DC pension and they both about 60% of the current LTA. 

I'm fulling intending to activate the DB scheme before an election as I'm paranoid any new government will tweak pension stuff negatively for me personally.

I'm aware an election is possible anytime but, guessing it will be 2nd half of 2024 and has to occur by January 2025.

My current thinking is consumed should I activate before or after the 6th of April 2024 when apparently the LTA has been removed fully.

My intention is to prune my DC scheme up until state pension at 67/2029 and mostly stay out of the 40% income tax bracket as far as possible and as I see fit.

I'm aware when governments previously chop pension stuff they allow various protections etc.

I know it's a crystal ball. 

I just need to decide wether I activate DB scheme in March or April 2024.

Any views most welcome please.

arnoldy

Is your DB deferred private sector? If so the inflation protection in deferment is much better than in payment. As inflation is very sticky it might be worth waiting till it is slain. Assuming you are under NRA you will also get less actuarial reduction. I am in a similar position with DB and DC.

RogerPensionGuy

arnoldy said:

Is your DB deferred private sector? If so the inflation protection in deferment is much better than in payment. As inflation is very sticky it might be worth waiting till it is slain. Assuming you are under NRA you will also get less actuarial reduction. I am in a similar position with DB and DC.

DB scheme is limited to a maximum 5% increase due inflation in any year, I'm totally guessing inflation will be between 2.5 and 6% the next few years. 

DB pays 67% to spouse if I expire 1st.

NRA in DB/deffered scheme is 60 so it's currently rolling up at about 5.8% PA plus inflation up to that 5% limit. 

Pat38493

First, if you have a deferred DB scheme, I’m not sure that short of Marxist revolution the government can do much to it because it’s mainly dictated by the rules and deeds of the scheme and not the government policy - they could of course increase direct taxation but this would affect you either way.

As regards which tax year to do things in, I think it’s a tricky one because right now, the thing to be concerned about is the limit on your tax free cash.  If you put your DB into payment this tax year, you are still operating under the old LTA rules and this will reduce the amount of tax free cash you can take from your DC fund if you try to take tax free cash from the DC fund afterwards.

On the other hand if you take the tax free cash out of your DC fund now, and then take your DB pension, under the current law I am not really sure how any PCLS that you wanted to take would be impacted, but if you take no PCLS you would take no penalty because the LTA tax rate is zero.  Therefore as long as these rules are in place you might be better to take the DB pension afterwards, and also for the reason mentioned by Arnold that the inflation increases to DB pensions in deferment are done on a cumulative basis and therefore one or two years of high inflation you will still get the full increase.  Not usually so once you put it into payment.

The big issue is that after 6th April 2024 it’s anybody’s guess because the legislation to completely abolish LTA has not been put in place yet and we don’t even have draft proposals.