PCLS in 2023/2024 where LTA exceeds 1,070,000

FIREDreamer

jamesd said:

shortseller09 said:

jamesd said:

The new rules explicitly exclude the 25% tax free from a small pot from counting towards the Lump Sum Allowance.

Thanks James, but I haven't seen this anywhere, can you provide a link?

One of those I posted earlier: 

 https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/lifetime-allowance-abolition-from-2024/the-new-allowances

"Small Pot Payments do not use up the LSA"

Looks like only small pots available because I used up all LTA.

Bit odd …

(1) Crystallise 100% LTA with no pcls you cannot take any pcls

(2) Crystallise 99.99% LTA with no pcls and you have £268k of pcls available in the future

Seems a nasty and mean cliff edge!

jamesd

But there's transitional protection:

"where the actual amount of tax free amounts received is lower than the default amount a scheme member can apply for a “transitional tax free amount certificate”.   Where a certificate is held then the LSA reduction is based on the certified amount not the default calculation amount."

"Geoff used 50% of his LTA.  This was used by taking £125,000 PCLS and putting £375,000 into drawdown when the LTA was £1million.  His LSA is reduced by 50% x £1,073,100 x 25% = £134,137.50.  

As his actual tax free cash is lower than £134,137.50 he can apply for a certificate showing £125,000 as his transitional tax free amounts.  His available LSA would be £143,275 instead of £134,137.50.  His available LSDBA is £948,100 instead of £938,962.50."

This does seem to be an area where further clarification would be useful.

FIREDreamer

jamesd said:

But there's transitional protection:

"where the actual amount of tax free amounts received is lower than the default amount a scheme member can apply for a “transitional tax free amount certificate”.   Where a certificate is held then the LSA reduction is based on the certified amount not the default calculation amount."

"Geoff used 50% of his LTA.  This was used by taking £125,000 PCLS and putting £375,000 into drawdown when the LTA was £1million.  His LSA is reduced by 50% x £1,073,100 x 25% = £134,137.50.  

As his actual tax free cash is lower than £134,137.50 he can apply for a certificate showing £125,000 as his transitional tax free amounts.  His available LSA would be £143,275 instead of £134,137.50.  His available LSDBA is £948,100 instead of £938,962.50."

This does seem to be an area where further clarification would be useful.

Would a letter confirming I took a DB of £x with no PCLS (because DB = Revalued GMP) from the DB scheme when I took the pension (quoting LTA percentage) be sufficient proof or is a formal certificate be required?

Pat38493

FIREDreamer said:

jamesd said:

But there's transitional protection:

"where the actual amount of tax free amounts received is lower than the default amount a scheme member can apply for a “transitional tax free amount certificate”.   Where a certificate is held then the LSA reduction is based on the certified amount not the default calculation amount."

"Geoff used 50% of his LTA.  This was used by taking £125,000 PCLS and putting £375,000 into drawdown when the LTA was £1million.  His LSA is reduced by 50% x £1,073,100 x 25% = £134,137.50.  

As his actual tax free cash is lower than £134,137.50 he can apply for a certificate showing £125,000 as his transitional tax free amounts.  His available LSA would be £143,275 instead of £134,137.50.  His available LSDBA is £948,100 instead of £938,962.50."

This does seem to be an area where further clarification would be useful.

Would a letter confirming I took a DB of £x with no PCLS (because DB = Revalued GMP) from the DB scheme when I took the pension (quoting LTA percentage) be sufficient proof or is a formal certificate be required?

The guidelines that was published earlier suggested you will need to apply for a formal certificate but the processs and nature of the evidence required has not been clarified.  I am sure it will all be in place and 100% clear by 6th April.  Or not.

jamesd

One of the least used answers here: I don't know.

Based on the linked content I suspect not but that same content says more clarity is needed about the requirements. I think it's currently unknowable, except maybe to the active participants in the legislative process.

MK62

jamesd said:

Based on the linked content I suspect not but that same content says more clarity is needed about the requirements. I think it's currently unknowable, except maybe to the active participants in the legislative process.

I wouldn't bank on that.....😉

jamesd

Well, I did write "maybe".

Albermarle

davec1001 said:

Albermarle said:

I do not want to worry @davec1001 or @FIREDreamer too much, but there seemed to be a point in the semi impenetrable draft legislation, that someone who had already crystallised 100% LTA, would not be able to take part in any of these new arrangements. There is not any logic in that as far as I can see, so may be a quirk that will be ironed out in the final legislation.

I've just 'changed my mind' and rolled back the crystallisation, meaning I have only taken 99% of LTA.

I am crossing my fingers I will be able to access  the LSA when the fog clears.

When I read an earlier link from gov.uk, it seemed to indicate that if someone had already taken 100% LTA, but not all the available tax free cash, then nothing could be done, and the transitional arrangements could not be used to free up more tax free cash.

Abolition of the Lifetime Allowance (LTA) - GOV.UK (www.gov.uk)

Transitional

To account for benefits taken before 6 April 2024 a transitional calculation is provided so that individuals can calculate their available lump sum allowance and lump sum and death benefit allowance.

Where an individual has previously used 100% of their LTA, they will have exhausted their allowances and the transitional calculation will not apply.

However the M&G/Pru link supplied by @Jamesd does not seem to say that, which would be more logical.
Probably not a bad idea though to save that last 1% to be one the safe side.

davec1001

Pat38493 said:

FIREDreamer said:

jamesd said:

But there's transitional protection:

"where the actual amount of tax free amounts received is lower than the default amount a scheme member can apply for a “transitional tax free amount certificate”.   Where a certificate is held then the LSA reduction is based on the certified amount not the default calculation amount."

"Geoff used 50% of his LTA.  This was used by taking £125,000 PCLS and putting £375,000 into drawdown when the LTA was £1million.  His LSA is reduced by 50% x £1,073,100 x 25% = £134,137.50.  

As his actual tax free cash is lower than £134,137.50 he can apply for a certificate showing £125,000 as his transitional tax free amounts.  His available LSA would be £143,275 instead of £134,137.50.  His available LSDBA is £948,100 instead of £938,962.50."

This does seem to be an area where further clarification would be useful.

Would a letter confirming I took a DB of £x with no PCLS (because DB = Revalued GMP) from the DB scheme when I took the pension (quoting LTA percentage) be sufficient proof or is a formal certificate be required?

The guidelines that was published earlier suggested you will need to apply for a formal certificate but the processs and nature of the evidence required has not been clarified.  I am sure it will all be in place and 100% clear by 6th April.  Or not.

Sigh, sounds like you are in the same place as me.    I have actually sent an enquiry to my DB provider and asked for proof / certificate.   I await their answer.

Pat38493

davec1001 said:

Pat38493 said:

FIREDreamer said:

jamesd said:

But there's transitional protection:

"where the actual amount of tax free amounts received is lower than the default amount a scheme member can apply for a “transitional tax free amount certificate”.   Where a certificate is held then the LSA reduction is based on the certified amount not the default calculation amount."

"Geoff used 50% of his LTA.  This was used by taking £125,000 PCLS and putting £375,000 into drawdown when the LTA was £1million.  His LSA is reduced by 50% x £1,073,100 x 25% = £134,137.50.  

As his actual tax free cash is lower than £134,137.50 he can apply for a certificate showing £125,000 as his transitional tax free amounts.  His available LSA would be £143,275 instead of £134,137.50.  His available LSDBA is £948,100 instead of £938,962.50."

This does seem to be an area where further clarification would be useful.

Would a letter confirming I took a DB of £x with no PCLS (because DB = Revalued GMP) from the DB scheme when I took the pension (quoting LTA percentage) be sufficient proof or is a formal certificate be required?

The guidelines that was published earlier suggested you will need to apply for a formal certificate but the processs and nature of the evidence required has not been clarified.  I am sure it will all be in place and 100% clear by 6th April.  Or not.

Sigh, sounds like you are in the same place as me.    I have actually sent an enquiry to my DB provider and asked for proof / certificate.   I await their answer.

Me not - I have made a note to definitely not put my DB into payment until after April 2024, but there are other posters on the boards who are in this situation having put their DB pension into payment in recent years.