LTA

NTFI19081

I know the Lifetime Allowance is ending, but lets say Labour bring it back as they suggest they will. As it has been operating to date, I am trying to work out what in a DB pension is included. Say my DB pension at NPA (66) is calculated to be worth 30k, but I take it early and 5k is deducted when I take it for early retirement factors. Which figure is used to calculate the LTA? Thanks 

HappyHarry

Labour would need to bring in new legislation and so the old rules are very unlikely to apply. The answer is that nobody knows.

hugheskevi

NTFI19081 said:

I know the Lifetime Allowance is ending, but lets say Labour bring it back as they suggest they will. As it has been operating to date, I am trying to work out what in a DB pension is included. Say my DB pension at NPA (66) is calculated to be worth 30k, but I take it early and 5k is deducted when I take it for early retirement factors. Which figure is used to calculate the LTA? Thanks 

The LTA value is based on the amount actually put into payment, so in this example, it would be based on the £25,000 annual pension plus any lump sum. Hence it would be £25,000 x 20 = £500,000 plus any lump sum.

Albermarle

NTFI19081 said:

I know the Lifetime Allowance is ending, but lets say Labour bring it back as they suggest they will. As it has been operating to date, I am trying to work out what in a DB pension is included. Say my DB pension at NPA (66) is calculated to be worth 30k, but I take it early and 5k is deducted when I take it for early retirement factors. Which figure is used to calculate the LTA? Thanks 

It is £25K that is used. That is why one tactic to reduce LTA liability, was to take a DB pension early.

NTFI19081

Thanks ! I appreciate the new LTA if it happens is an unknown - but need some way of planning when all this keeps changing

Hoenir

NTFI19081 said:

 but need some way of planning when all this keeps changing

Never going to happen. You can only work with the known rules. Endless speculation is a waste of time and effort. 

HappyHarry

NTFI19081 said:

Thanks ! I appreciate the new LTA if it happens is an unknown - but need some way of planning when all this keeps changing

The new LTA, if it ever exists, is unknown and how it might be calculated is also unknown. 

I imagine that the old “20x annual DB pension payment” is very unlikely to be reintroduced as part of any new calculation. 

As new legislation would be needed, there will undoubtedly be a period of time when the new legislation is under discussion and we will all find out what is planned. Until that time, guessing about future levels, calculations, penalties etc is futile.

smithwilfer1

consult with a financial advisor or pension specialist for specific guidance tailored to your circumstances and any potential changes in legislation.

Albermarle

smithwilfer1 said:

consult with a financial advisor or pension specialist for specific guidance tailored to your circumstances and any potential changes in legislation.

The previous poster to you was an IFA and they said.

 Until that time, guessing about future levels, calculations, penalties etc is futile.

So not sure consulting an IFA about future legislation would be very fruitful. In fact due to all the regulations they have to follow, I would think they would actively avoid offering any advice on future guesswork.

Sterlingtimes

It's time for a "happy dance".

The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2024

1.—(1) These regulations may be cited as the Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2024.

(2) These regulations come into force on 6th April 2024.

(3) The amendments made by these regulations have effect for the tax year 2024-25 and subsequent tax years.

Sterlingtimes

Albermarle said:

The previous poster to you was an IFA and they said.

 Until that time, guessing about future levels, calculations, penalties etc is futile.

So not sure consulting an IFA about future legislation would be very fruitful. In fact due to all the regulations they have to follow, I would think they would actively avoid offering any advice on future guesswork.

I agree that consulting an IFA about future legislation would not be fruitful. However, pension investors and pensioners will surely speculate about the measures a Labour Government would take. The Labour Party has signalled that it intends to do ghastly things with pensions by reinstalling the LTA to punish investment success. It may be that public sector workers and pensioners will be held harmless while those linked with the private sector will be punished. The Labour Party really should be honest about its intentions so that we can plan ahead, perhaps by investing in low-growth low-risk investments to avoid punishment.