LTA Excess Charge Abolition

Albermarle

Or if you have taken a DB pension already with no ( or reduced PCLS) it says this;

What if you previously accessed final salary benefits?

This is potentially more relevant to those with previous defined benefit pensions where they might have taken a higher starting pension income, for example, in exchange for a lower, or even no, tax-free cash payment. Where no tax-free cash was taken before, it’s lost under current rules, and could still be lost under the new rules.

However it then says this ;

New transitional tax-free amount certificate (TTFA)

The new rules could let some individuals (or, if deceased, their personal representatives) to apply for a TTFA certificate by providing evidence of how much has been withdrawn tax free in the past.

This could potentially allow them (or their beneficiaries) to take more tax free than they would’ve been able to under the current rules, or under HMRC’s standard transitional calculation.

Who could consider applying for a TTFA?
The following also apply to personal representatives applying on behalf of deceased individuals.

1. Anyone who didn’t commute their defined benefits pensions or possibly those who might have taken a guaranteed annuity rate only from their defined contribution pension. 

Apparently somewhat contradictory .

zagfles

Pat38493 said:

Do I understand from this that if you took a DB pension prior to these changes with the full amount of PCLS, you won't be eligable for any kind of certificate?

If you did this, wouldn't your future TFC be limited not only by the PCLS that you took, but by the 20xDB amount multiplier, so you will be worse off in the end?

No.

AIUI, put very simply and ignoring complications like LTA protections, pre A-day pensions, overseas transfers etc.

On 6 April LTA will go and you'll have a tax free lump sum allowance instead. That will be set at 25% of your remaining LTA.

If you want, you can apply for a certificate which instead gives you a lump sum allowance of 268,275 minus tax free lump sums already taken.

If you've crystallised while the LTA has been at the current value and you've taken the max PCLS, the calculations will be identical. If you've taken less than the max PCLS or crystallised when the LTA was higher or lower than it is now, the calculations will be different.

But you need to be certain before applying for a certificate as there's no going back apparently!

zagfles

Albermarle said:

Or if you have taken a DB pension already with no ( or reduced PCLS) it says this;

What if you previously accessed final salary benefits?

This is potentially more relevant to those with previous defined benefit pensions where they might have taken a higher starting pension income, for example, in exchange for a lower, or even no, tax-free cash payment. Where no tax-free cash was taken before, it’s lost under current rules, and could still be lost under the new rules.

However it then says this ;

New transitional tax-free amount certificate (TTFA)

The new rules could let some individuals (or, if deceased, their personal representatives) to apply for a TTFA certificate by providing evidence of how much has been withdrawn tax free in the past.

This could potentially allow them (or their beneficiaries) to take more tax free than they would’ve been able to under the current rules, or under HMRC’s standard transitional calculation.

Who could consider applying for a TTFA?
The following also apply to personal representatives applying on behalf of deceased individuals.

1. Anyone who didn’t commute their defined benefits pensions or possibly those who might have taken a guaranteed annuity rate only from their defined contribution pension. 

Apparently somewhat contradictory .

It's not contradictory, there's a lot of "could"s there.

Someone who took a DB pension with no tax free cash won't benefit from the new rules if:

1) They have no other pension

2) They have other pensions but wouldn't have got near the LTA anyway

3) Possibly if they also took a DC pension when the LTA was higher and so used a lot of PCLS there

It's likely that the vast majority of people who took DB pensions with no PCLS won't benefit because of point 1 or 2.

I thought they might allow unused lump sum entitlements to be carried forwards into other pensions but that doesn't appear to be the case, think it's still a max 25% of each individual arrangement.

Albermarle

zagfles said:

Albermarle said:

Or if you have taken a DB pension already with no ( or reduced PCLS) it says this;

What if you previously accessed final salary benefits?

This is potentially more relevant to those with previous defined benefit pensions where they might have taken a higher starting pension income, for example, in exchange for a lower, or even no, tax-free cash payment. Where no tax-free cash was taken before, it’s lost under current rules, and could still be lost under the new rules.

However it then says this ;

New transitional tax-free amount certificate (TTFA)

The new rules could let some individuals (or, if deceased, their personal representatives) to apply for a TTFA certificate by providing evidence of how much has been withdrawn tax free in the past.

This could potentially allow them (or their beneficiaries) to take more tax free than they would’ve been able to under the current rules, or under HMRC’s standard transitional calculation.

Who could consider applying for a TTFA?
The following also apply to personal representatives applying on behalf of deceased individuals.

1. Anyone who didn’t commute their defined benefits pensions or possibly those who might have taken a guaranteed annuity rate only from their defined contribution pension. 

Apparently somewhat contradictory .

It's not contradictory, there's a lot of "could"s there.

Someone who took a DB pension with no tax free cash won't benefit from the new rules if:

1) They have no other pension

2) They have other pensions but wouldn't have got near the LTA anyway

3) Possibly if they also took a DC pension when the LTA was higher and so used a lot of PCLS there

It's likely that the vast majority of people who took DB pensions with no PCLS won't benefit because of point 1 or 2.

I thought they might allow unused lump sum entitlements to be carried forwards into other pensions but that doesn't appear to be the case, think it's still a max 25% of each individual arrangement.

Thanks for the explanation which makes it clearer.
Just for info , I took a DB pension with no commutation/PCLS.
Although 25% of  my DC pots currently would not generate £268K, they may well do one day especially if the figure stays frozen for a while, which seems likely.
So I may well have use of a TTFA from the DB scheme, although I will wait until the situation settles down, especially as the DB administrator is Mercer, not known for being quickly up to speed !