Maximum tax-free lump sum

dw3305

For the purpose of calculating the remaining tax-free lump sum what do you include for lump sums paid out before 2006.  Nothing?  The amount actually paid (long forgotten)?  Some hypothetical figure base on the amount of pension being paid now?
I can't seem to find anything about this anywhere.

xylophone

This?

https://adviser.royallondon.com/technical-central/pensions/pension-protection/protection-of-scheme-specific-tax-free-lump-sum/#:~:text=the pre-6 April 2006,plan on 6 April 2006.

dw3305

No, I don't think it is.  Isn't that about people who had an entitlement in 2006 and took the pension later, whereas I'm talking about a pension that was already in payment, the lump sum having been taken earlier?  You might think that a lump sum taken before 2006 was ignored, but the associated pension was certainly taken into account for the lifetime allowance.

xylophone

Try again...this under There’s also an overall limit across all schemes:?

https://techzone.abrdn.com/public/pensions/Tech-guide-tax-free-cash#:~:text=There's also an overall limit,can have a higher LSA.

dw3305

I'm still not seeing it.  A 50 year old retires early in 1999 from a final salary pension scheme with an entitlement of £40K a year.  He surrenders 25% of it and takes a tax-free lump sum of £100K.  He takes another job and starts saving into another pension.  He is now 75 and wants to know how much he can take out tax-free.  His inflation linked pension is now £60K a year, so it would have exceeded the lifetime allowance.  But the lifetime allowance is no more.

So can he take tax-free £268,275, £168,275 or nothing (assuming none of these sums are more than 25% of hs fund)?

Marcon

Given the utter mess this whole LTA issue is, try posting a question on https://community.hmrc.gov.uk/customerforums/

Beware how you phrase your question. I've been following the thread on the change in minimum pension age: https://community.hmrc.gov.uk/customerforums/pt/01c7bb75-edec-ee11-a81c-00224800d1a4

It's clear from the trouble people asking questions on that threat have been having in getting sensible answers that you need your question to be very clearly and precisely framed if you're to get a half-sensible answer.

zagfles

See Lifetime allowance guidance newsletter: February 2024 - GOV.UK (www.gov.uk) and the bit on
"pre-commencement pensions"

dw3305

I've found this, which I think is a pretty clear plain English explanation.

https://adviser.royallondon.com/technical-central/pensions/benefit-options/Lump-sum-and-lump-sum-death-benefit-allowances-from-April-2024/

What happens if there has been no benefit crystallisation events between 5 April 2006 and 6 April 2024?

This is most likely to be the case where someone has a protected retirement age, such as football players.  Where only pre-6 April 2006 benefits are in payment, so none have been taken after 5 April 2006 and before 6 April 2024, the lump sum allowance and lump sum and death benefit allowance is reduced by 25% of 25 x the current level of income being paid.

So no tax-free lump sum for someone getting a current £60K pension irrespective of how much he got back in 1999.  Thanks for all the help.