Avoiding future (re)imposition of LTA

phguk

I have Defined Benefit & Defined Contribution pensions that when combined, exceed the last LTA and worry what Labour will do if they win a future election. If I take the maximum (25%) tax free cash from a DC pension - does it (a) crystallise the entire pension pot and (b) can I still contribute up to £60K per annum (or does the MPAA cut in) ?

Marcon

phguk said:

I have Defined Benefit & Defined Contribution pensions that when combined, exceed the last LTA and worry what Labour will do if they win a future election. If I take the maximum (25%) tax free cash from a DC pension - does it (a) crystallise the entire pension pot and (b) can I still contribute up to £60K per annum (or does the MPAA cut in) ?

a) Yes
b) The MPAA only cuts in if you 'flexibly access' any part of the remaining 75% of your DC pot. You can take up to 3 'small pots' of no more than £10K each without triggering the MPAA - but you must specify to your provider that's the regime you want to follow when cashing them in.

phguk

Thanks Marcon. Dare I enquire if there are other ways to crystallise the entire DC pot without taking the 25% immediately ? Would simply an election to move to drawdown achieve this ?
I imagine anyone over the LTA limit today must be wondering how to shield from the Labour Party.

Pat38493

phguk said:

Thanks Marcon. Dare I enquire if there are other ways to crystallise the entire DC pot without taking the 25% immediately ? Would simply an election to move to drawdown achieve this ?
I imagine anyone over the LTA limit today must be wondering how to shield from the Labour Party.

If it’s a DC pension, legally you could crystallise the entire pension into drawdown without withdrawing any but you would then forgo the right to take any of it tax free, which for most people would not make any sense.  

You may want to wait a bit because the law will change in April, supposedly to abolish the LTA completely, although the papers that were released up to now seem more like a kind of rehash of the current approach in order to facilitate the limit on tax free cash.

I don’t think Labour will reinstate the LTA at the previous rate, if at all,  as this would cause them a lot of other issues, and I don’t think it would be their top priority anyway.  

RogerPensionGuy

phguk said:

Thanks Marcon. Dare I enquire if there are other ways to crystallise the entire DC pot without taking the 25% immediately ? Would simply an election to move to drawdown achieve this ?
I imagine anyone over the LTA limit today must be wondering how to shield from the Labour Party.

Sounds like I'm in similar position to this issue and thread. In fact I was, am and remains paranoid about that LTA. 

I have researched and found that whenever they tinkered negatively with the LTA since 2005 was it, they always provided sensible protections so as people could maintain what was previously on offer.

However, it's worth remembering some protections required no more pension inputs to occur which is okay if a person has stopped putting inputs in, but pretty unreasonable for people not in this position, luckily I've just stopping paid employment and pension inputs. 

If the OP looks at my posts or threads, they will find lots of good information. 

On one of the threads I was on, a poster put a nice link on from an FT advisor site or link and it was very clear how the LTA has been treated historically when they tinker with it negatively. 

I'll try finding it and post it here, or maybe maybe another poster can find it quicker that me.

Cheers Roger. 

Albermarle

phguk said:

I have Defined Benefit & Defined Contribution pensions that when combined, exceed the last LTA and worry what Labour will do if they win a future election. If I take the maximum (25%) tax free cash from a DC pension - does it (a) crystallise the entire pension pot and (b) can I still contribute up to £60K per annum (or does the MPAA cut in) ?

If you have pensions worth well over One Million Pounds (and still adding £60K pa), I think that worrying about a possible tax charge, that may or may not happen ( probably will not ) is possibly getting things a bit out of perspective.

RogerPensionGuy

https://www.ftadviser.com/opinion/2023/07/06/to-crystallise-or-not-to-crystallise/

shortseller09

Just to note that if your DC pot exceeds the last LTA, and you take maximum tax free cash, only £1,073,100 will be automatically crystallised, unless you specify crystallising the entire pot.

ukdw

This article doesn't say a lot - but I think Steve Webb is always worth reading - basically he is saying it is going to be tricky to re-introduce LTA - and due to that likely to be April 26 at the earliest.   https://www.moneymarketing.co.uk/opinion/steve-webb-three-big-challenges-holding-lta-reintroduction-back/

LHW99

This article may be of interest

https://www.ajbell.co.uk/articles/investmentarticles/269217/government-confirms-pension-tax-rules-following-lifetime

RSTime

RogerPensionGuy said:

https://www.ftadviser.com/opinion/2023/07/06/to-crystallise-or-not-to-crystallise/

Has the lifetime allowance now officially gone (has the legislation been passed)?

EDIT - this is all I could find and legislation does not seem to have made progress?

Abolishing the pensions lifetime allowance - from gov.uk