DB when used up allowable TF cash

Tommyjw

Right now i doubt many, if any, administrators know what they will be doing post-LTA.

Will we, like we do for current LTA, basically do a "you tell us if you're over the LTA or not and we'll trust you" and just ask someone to connfirm if they have enough cash allowance left? Probably, its a large administrative burden for everyone involved to doing anything more detailed.

I doubt anything will charge against how it currently is and then simply the DB scheme will not be able to pay any cash if you've used that up, you'll be offered the pension option only. 

In every Scheme i've come across that offers an automatic lump sum (without the need to commute pension) they offer to exchnage that cash for additional pension, you just don't find this is a very sought after option so barely anyone takes it, i imagine that will continue and any who don't have this option will be engaging with their actuaries to make it happen.

Pat38493

I asked a similar question here a while back because based on the fact that the old LTA legislation is still there, I was wondering if you would be hit with an LTA charge for exceeding the LTA..... of zero percent.

One of the replies stated that no you would be end up being charged tax at your marginal rate on the PCLS but I'm not sure under what tax law that would be done because that's not how it would have worked under the LTA legislation, which I think is still in force.

Doglegger

Pat38493 said:

I asked a similar question here a while back because based on the fact that the old LTA legislation is still there, I was wondering if you would be hit with an LTA charge for exceeding the LTA..... of zero percent.

One of the replies stated that no you would be end up being charged tax at your marginal rate on the PCLS but I'm not sure under what tax law that would be done because that's not how it would have worked under the LTA legislation, which I think is still in force.

I believe the only people who would have experienced this up to now would have been anybody in receipt of a DB further down the line from being over 100% LTA. As far as I can see it's, for all intents and purposes, the same scenario but now with the max TFLS being the constricting factor. Would be interesting to see if anybody here has done or heard of a similar situation with regards to max LTA when in force. As mentioned above, this may all be under consideration by the individual schemes in regards to the scrapping of the LTA.

Tommyjw

Pat38493 said:

I asked a similar question here a while back because based on the fact that the old LTA legislation is still there, I was wondering if you would be hit with an LTA charge for exceeding the LTA..... of zero percent.

One of the replies stated that no you would be end up being charged tax at your marginal rate on the PCLS but I'm not sure under what tax law that would be done because that's not how it would have worked under the LTA legislation, which I think is still in force.

Yes it is marginal for over LTA at the moment

https://www.gov.uk/government/publications/abolition-of-lifetime-allowance-and-increases-to-pension-tax-limits/pension-tax-limits 

"Change the taxation of the LTA excess lump sum ... where they are currently subject to a 55% tax charge above the LTA, to taxation at an individual’s marginal rate"