Three obscure pension questions! Someone will know...

Albermarle

Steve_666_ said:

Albermarle said:

Silvertabby said:

Re Q3.  A story floated round pension world some time ago about someone who tried this for LTA purposes.  Wife: No pensions of her own.  Husband:  Pushing towards LTA X 2.  The plan was to divorce, split the pension via a PSO, then re-marry after the dust had settled.  But the wife had other ideas - she took the money and ran.

A salutary tale of putting the tax tail before the marriage dog !

If the "someone" pursued a career for a working lifetime, built a hugh pension fund, while his wife perform unpaid labour, house, kids etc, then she is entitle to 50% of their joint retirement fund!

Absolutely agree, but not via the method suggested, which is deliberate tax evasion.

Pat38493

Climberjohn said:

OP here.
Thanks for the replies!  A few comments/responses:
- I have spoken to three IFAs.  It's never great when the punter knows more than the advisor as was the case with the first.  The second knew more than me, but wasn't able to give advice on either point 1 or 2.  And the third said they could give advice but wanted 3% annually of the pot to do so.  So I thought I'd trawl some views.  I'm fully aware that the internet can be pretty uninformed too...and have asked for pros/conns not advice.
- Not sure what the perjury response refers to.  The new quickie divorce rules do not require blame and a reason, only agreement.
- I'm not serious about the divorce thing; it's a thought experiment.
- Leaving it in the pot uncrystallised is fine (I don't need it)...unless the LTA comes back
- Someone must have a view on Q1?

I've seen a few threads on here with people, jokeingly or otherwise, proposing that they should get divorced (and then in some cases re-marry later) for tax reasons.  I haven't seen any post from anyone who has actually tried this, but some posters have surmised that you might fall foul of one or other laws, perjury might be a bit far as you say due to the no fault divorce rules coming in, but I think HMRC have some catch all laws for tax avoidance that might apply.

Of course, proving it one way or the other could involve expensive court proceedings whilst one side claims it's tax evasion, and the other just says we fell out of love then back in again....

There could also be other negative consequences e.g. IHT implications and so on.

Understood it's a joke - but anyway just thought I would comment on it.

Pat38493

Climberjohn said:

Hello!
I did try to search, but either got no results or a bazillion, so I'm hoping someone who knows can give me a straightforward answer.  It's much appreciated.
Question 1.
I have two defined benefit pensions that are in payment and do a small amount of part time work.
I took some tax free cash and a reduced pension, but not all that I could have: the Lifetime allowance value of the pensions was about £535k and I took £50k cash.
I have a defined contribution SIPP worth >£1m.
How much tax free cash can I take from the SIPP?  Is it a) £218k (being £268k max less the £50k received) or b) £134k (being 50% of the remaining notional LTA) or c) a hybrid that has used the tax free cash for the LTA value of the pension it was drawn from?
Question 2.
Given that I'm very fortunate and would be well over the LTA, what are the pros and cons of crystallising the SIPP and putting it all into drawdown so that it's outside any reinstatement of the LTA (i.e. before April)?  Do I lose tax free growth if crystallised?  Do those pros/cons change if I add the info that I have cancer and getting to 75 is about a 30% chance?
Question 3.
I'm married and my wife has £200k defined contribution savings.  If we divorced and split everything equally (pension in payment, pooled SIPP/DC), how much tax free cash could we each take (given question 1) and what would the LTA be (I know it's nominally gone but...)?

FWIW, I think the answer to #1 is b) (although I want it to be a), to #2 is that if I have a purpose for it, grab the cash but not otherwise, and #3 getting divorced makes no difference to tax free cash, would optimise for LTA if it still existed and would be good for income tax (from a purely tax perspective!)

Would very much value authoritative information!

For Q1 please see the recent long post by Rogerpensionguy in this thread:

https://forums.moneysavingexpert.com/discussion/6487267/lta-excess-charge-abolition#latest

In short, I'm not sure it's totally clear - you might be able to get an "TTFA Certificate" to negate the DB portion impact of your tax free cash.  However I'm not sure anyone knows 100% for sure yet.

dunstonh

- I have spoken to three IFAs.  It's never great when the punter knows more than the advisor as was the case with the first.  The second knew more than me, but wasn't able to give advice on either point 1 or 2.  And the third said they could give advice but wanted 3% annually of the pot to do so.  So I thought I'd trawl some views.  I'm fully aware that the internet can be pretty uninformed too...and have asked for pros/conns not advice.

If you don't employ an adviser, they will not give advice. If they tell you without you paying for it then that is a bad business model.    
Also, if its an FA rather than an IFA, then its possible that its not within their area of authorisation (e.g. an FA belonging to an asset builder rather a planner).
Some of the information about the changes is very technical, and some firms will employ specialists in the firm to handle that side of things and leave other advisers to focus on the non-technical side.
Maybe they smelt a time waster and didn't want to engage with you.
No adviser in the UK charges 3% pa. or anything close to that.  Typical range is 0.5% to 1.0%.

I know the answer to point 1 but only because of the recent clarification publications as it was unclear before the January updates and those were only becoming available after professional analysis in the last week or two.   A lot of the free resources on the internet are using the earlier publications and have yet to be updated with the clarification points.

Climberjohn

dunstonh said

I know the answer to point 1 but only because of the recent clarification publications as it was unclear before the January updates and those were only becoming available after professional analysis in the last week or two.   A lot of the free resources on the internet are using the earlier publications and have yet to be updated with the clarification points.

Well, bravo for you!

Keep us posted.

Marcon

Climberjohn said:

- Someone must have a view on Q1?

Same view I had before: use someone who is insured to advise you (so if they get it wrong, you've got a comeback). A straw poll on the Internet isn't a good substitute, and surely given the amounts involved you wouldn't rely on it?

Climberjohn

Marcon said:

Climberjohn said:

- Someone must have a view on Q1?

Same view I had before: use someone who is insured to advise you (so if they get it wrong, you've got a comeback). A straw poll on the Internet isn't a good substitute, and surely given the amounts involved you wouldn't rely on it?

Well, it's a pretty clear cut and dried item so I figured someone will have been down that road.  If these boards are just feeders for IFAs, that's fine...but I imagined it was people sharing their experiences.

Grumpy_chap

I don't see anyone turning this into a feeder for IFA's.

You asked, as you acknowledge in the thread title, "obscure" questions and, as indicated by another poster, the answer to one of those questions has only recently become knowledgeable to professionals in the business.  The information and any recommendation needs to be given to you based upon a proper analysis of your specific circumstances and that will require paid professional service by a company that carries the necessary insurances in case of error.  Anyone giving you a rough answer via an online forum based upon limited information may well lead you down the wrong path and result in you suffering financial losses.  Hence, those that do know, have held back.  Those that made this comment in this regard on this thread are very helpful individuals and share information where they can meaningfully do so without excessive exposure, so I trust their responses.

Climberjohn

Grumpy_chap said:

I don't see anyone turning this into a feeder for IFA's.

You asked, as you acknowledge in the thread title, "obscure" questions and, as indicated by another poster, the answer to one of those questions has only recently become knowledgeable to professionals in the business.  The information and any recommendation needs to be given to you based upon a proper analysis of your specific circumstances and that will require paid professional service by a company that carries the necessary insurances in case of error.  Anyone giving you a rough answer via an online forum based upon limited information may well lead you down the wrong path and result in you suffering financial losses.  Hence, those that do know, have held back.  Those that made this comment in this regard on this thread are very helpful individuals and share information where they can meaningfully do so without excessive exposure, so I trust their responses.

Lol.  The rules are the rules...they don't vary with my circumstances.  Q1 is a pretty cut and dried situation.  I'm sure those folks "in the know" would be able to articulate the principles of the rules without giving advice.  Perhaps I should change my question to:
"I have found various guidance documents from HMRC on the issue described.  Where do they post the most up to date guidance as I don't wish tot have missed something in my own research"

Pat38493

Climberjohn said:

Grumpy_chap said:

I don't see anyone turning this into a feeder for IFA's.

You asked, as you acknowledge in the thread title, "obscure" questions and, as indicated by another poster, the answer to one of those questions has only recently become knowledgeable to professionals in the business.  The information and any recommendation needs to be given to you based upon a proper analysis of your specific circumstances and that will require paid professional service by a company that carries the necessary insurances in case of error.  Anyone giving you a rough answer via an online forum based upon limited information may well lead you down the wrong path and result in you suffering financial losses.  Hence, those that do know, have held back.  Those that made this comment in this regard on this thread are very helpful individuals and share information where they can meaningfully do so without excessive exposure, so I trust their responses.

Lol.  The rules are the rules...they don't vary with my circumstances.  Q1 is a pretty cut and dried situation.  I'm sure those folks "in the know" would be able to articulate the principles of the rules without giving advice.  Perhaps I should change my question to:
"I have found various guidance documents from HMRC on the issue described.  Where do they post the most up to date guidance as I don't wish tot have missed something in my own research"

I suspect that if you wait for a while there will be more publications that are available to all of us that will give some more clarity.