Transition Arrangements for PCLS following abolition of LTA in April

davec1001

Sigh,  Just checked the March newsletter
Lifetime allowance guidance newsletter: March 2024 - GOV.UK (www.gov.uk)

Not too much help.  Problem is that evidence of not taking a lump sum doesn't appear to be explicitly called out.

It is WillsTowersWatson that I am hoping will ride to my rescue by explicitly stating their calculation of LTA used involved no lump sum.

Paras 2-4 of the evidence stuff from the finance act looks like this

(2)“Lump sum and death benefit transitional tax-free amount”, in relation to an individual, means the total of—

(a)each relevant lump sum (if any) to which the individual has, before 6 April 2024, become entitled under a registered pension scheme, so far as no charge to income tax under Part 9 of ITEPA 2003 or Part 4 of FA 2004 arises in respect of it, and

(b)each relevant lump sum death benefit (if any) paid before 6 April 2024 by a registered pension scheme in respect of the individual so far as no charge to income tax under Part 9 of ITEPA 2003 or Part 4 of FA 2004 arises in respect of it.

(3)For the purposes of sub-paragraph (2)—

(a)a lump sum is “relevant” if the individual becoming entitled to it constituted a benefit crystallisation event within the meaning of Part 4 of FA 2004;

(b)a lump sum death benefit is “relevant” if its payment constituted a benefit crystallisation event within the meaning of Part 4 of FA 2004.

(4)“Complete evidence”, in relation to an individual’s lump sum and death benefit transitional tax-free amount, means evidence of—

(a)each lump sum (if any) to which the individual has become entitled, and

(b)each lump sum death benefit (if any) that has been paid in respect of the individual,

that is comprised, or any part of which is comprised, in the individual’s lump sum and death benefit transitional tax-free amount.

Pat38493

jaypers said:

I went through this with my advisor last week. My circumstances are that I fully crystallised (100%) 5 years ago to take 25% tax free cash. I have some remaining ‘excess LTA’ cash left.

From the new tax year, I will need to apply for this transitional certificate from my provider. This will allow me to apply for further tax free cash, based on the difference between the LTA limit at the time of my original crystallisation (£1,030,000) and now (£1,073,100). This will mean crystallising a further £43,100 giving an additional tax free sum of £10,775

There are a number of hoops to jump through here and one to watch it that with effect from 6th April, if any crystallisation events occur before going through this process you won’t be able to get any further tax free cash.

Would advise anyone to speak to their IFA if they are in this very fortunate position. 

Based on the letter posted in this thread from HL, I don't really underestand why you need a Transition certificate in your situation?  If you have taken 25% of everything you crystallised tax free, you don't need one.  Or am I reading the letter wrong?  As far as I could tell, it's only if you have used LTA allowance without taking any tax free cash (i.e. by putting a DB pension into payment without PCLS) that you need this certificate.

Albermarle

Pat38493 said:

jaypers said:

I went through this with my advisor last week. My circumstances are that I fully crystallised (100%) 5 years ago to take 25% tax free cash. I have some remaining ‘excess LTA’ cash left.

From the new tax year, I will need to apply for this transitional certificate from my provider. This will allow me to apply for further tax free cash, based on the difference between the LTA limit at the time of my original crystallisation (£1,030,000) and now (£1,073,100). This will mean crystallising a further £43,100 giving an additional tax free sum of £10,775

There are a number of hoops to jump through here and one to watch it that with effect from 6th April, if any crystallisation events occur before going through this process you won’t be able to get any further tax free cash.

Would advise anyone to speak to their IFA if they are in this very fortunate position. 

Based on the letter posted in this thread from HL, I don't really underestand why you need a Transition certificate in your situation?  If you have taken 25% of everything you crystallised tax free, you don't need one.  Or am I reading the letter wrong?  As far as I could tell, it's only if you have used LTA allowance without taking any tax free cash (i.e. by putting a DB pension into payment without PCLS) that you need this certificate.

I would have thought the same , but I can see where they are coming from. They have taken tax free cash of £257,500 and the new limit is £268, 275, so they can take some more. 
There is maybe something in the small print that covers this but I do not know. Hopefully their IFA is correctly interpreting these new rules but maybe not ?

davec1001

Here is the II position ....Anyone else had any info?

Please accept my sincere apologies for the delay in coming back to you concerning the proposed legislative changes due to come into effect from 6 April 2024 with the abolishment of the Lifetime Allowance (LTA) and the introduction of new allowances, including the Lump Sum Allowance (LSA) and the Lump Sum and Death Benefit Allowance (LSDBA) and whether you will be entitled to receive a Transitional Tax-Free Amount Certificate (TTFAC).

We (ii) as the Scheme Administrator and Operator of the ii SIPP along with the pensions industry as a whole are still waiting for clarification from the Government / HMRC on what specific evidence a member will be required to provide to a Scheme Administrator to enable them to produce a TTFAC. The application for a TTFAC must be accompanied by ‘complete evidence’ however currently there is no guidance as to what constitutes ‘complete evidence’. As soon as we are provided with clarity and guidance from the Government / HMRC we will be able to put a full procedure in place to deal with requests such as yours. However, given that we are still awaiting that clarification and despite the fact this is due to come into effect from tomorrow, we fully understand this is not helpful to members like you or us as the Scheme Administrators or Operators of pension schemes.

Your request will be noted as being received from the date the new legislation comes into effect (6 April 2024). You should be aware that when a Scheme receives an application for a TTFAC they have 3 months to either issue this to the applicant or notify the applicant that their application has been refused.

We note that you are looking to crystallise benefits as soon as possible into the new tax year. We understand there may be implications if you crystallise benefits after 6 April 2024 before receiving a TTFAC or you have an application declined. Given the potential issues and the fact we are an execution only provide so we cannot and do not provide financial or tax advice, we would strongly suggest that you seek the guidance of a suitably qualified financial adviser who will be able to guide and advise you based on your own personal circumstances.

Please be assured, as soon as clarification is received from the Government / HMRC we will contact you on how to take this forward.

Whilst we appreciate this will be frustrating from your perspective, we hope you understand that these issues are out of our control.

davec1001

Looks like AJ Bell are being more helpful.

What type of evidence for lump sums is AJ Bell Investcentre asking for?

It must state the pension scheme, the policy number or reference (if there is one), the type of lump sum, the lump sum amount and the date. For pensions where your client gave up their entire lump sum, the evidence must confirm this in some way.

The ideal evidence will therefore be a copy of the confirmation letter the client received at the time the lump sum was paid. If your client no longer has that, we will accept a recent letter or e-mail from the scheme administrator or trustee

davec1001

Would be very much appreciated if you post when/if you hear anything more from HL.   II maintain that the 'industry' await info from HMRC, although I don't see anything that suggests HMRC are planning any further announcements

Albermarle

davec1001 said:

Would be very much appreciated if you post when/if you hear anything more from HL.   II maintain that the 'industry' await info from HMRC, although I don't see anything that suggests HMRC are planning any further announcements

I think some providers will be waiting to see that everyone understands and interprets the HMRC announcements in the same way.

FIREDreamer

davec1001 said:

Would be very much appreciated if you post when/if you hear anything more from HL.   II maintain that the 'industry' await info from HMRC, although I don't see anything that suggests HMRC are planning any further announcements

They sent me a link to this form today for me to fill in …

davec1001

Many thanks.....looks like Interactive Investor are stalling/behind the curve

FIREDreamer

davec1001 said:

Many thanks.....looks like Interactive Investor are stalling/behind the curve

Legislation states they have up to 3 months to provide the certificate - be interesting to see how long it actually takes.