Confused about new LTA rules

Neversurrender

Hi,

I have been trying to understand this Lifetime allowance stuff, especially since the new rules werwe introduced.and was wondering if anyone could assist please.

The more I google and ask the more confusing it gets, and my priovider just bombards me with acronyms and other jargon

I'm aware the old rules calculated lifetime allowance as a percentage.

Heres my case.

Pension is a SIPP platform with A J Bell.

1) I have made about 3 drawdowns before new rules introduced this April 2024

    Each drawdown included a tax free element of 25%

2) And I have made a drawdown which occured this April after the new rules introduced, again   with a tax free elemenmt of 25%

Do I now simply add up the total of all the tax free I have taken in each drawdown and deduct from the new limit of  £268,275 to work out what allowance I have left?

Any help much appreciated,

Thanks

Albermarle

Do I now simply add up the total of all the tax free I have taken in each drawdown and deduct from the new limit of  £268,275 to work out what allowance I have left?

Basically yes.

shortseller09

If you drew down when the LTA was lower than £1,073,100 it would be worth looking at a Transitional Tax-Free Amount Certificate. 

Neversurrender

shortseller09 said:

If you drew down when the LTA was lower than £1,073,100 it would be worth looking at a Transitional Tax-Free Amount Certificate. 

Many thanks. Will do

shortseller09

Just reread your post - if you have drawn down this financial year i.e. after April 6th, then I don't beleive you are eligible for a TTFAC, apologies for any misunderstanding.

dunstonh

2) And I have made a drawdown which occured this April after the new rules introduced, again   with a tax free elemenmt of 25%

As mentioned above, this prevents you from applying for a certificate.  You must apply for the certificate before a BCE occurs after 6th April 2024.

Do I now simply add up the total of all the tax free I have taken in each drawdown and deduct from the new limit of  £268,275 to work out what allowance I have left?

No.  You have lost that option.   You are now limited to using the lifetime allowance figures.

Remaining lump sum allowance = £268,275 – (25% x previously used % of lifetime allowance on 5 April 2024 x £1,073,100).

JamesP8

dunstonh said:

2) And I have made a drawdown which occured this April after the new rules introduced, again   with a tax free elemenmt of 25%

As mentioned above, this prevents you from applying for a certificate.  You must apply for the certificate before a BCE occurs after 6th April 2024.

Do I now simply add up the total of all the tax free I have taken in each drawdown and deduct from the new limit of  £268,275 to work out what allowance I have left?

No.  You have lost that option.   You are now limited to using the lifetime allowance figures.

Remaining lump sum allowance = £268,275 – (25% x previously used % of lifetime allowance on 5 April 2024 x £1,073,100).

I'd be most grateful for some added clarity here please. My position is that I had crystallised a percentage of the Lifetime Allowance pre 6th April 2024, via my SIPP, taking 25% tax free at that time.

I am now hoping very shortly to initiate a defined benefit pension (so post 6th April 2024) and take an element of the offered tax free cash. My understanding was that the tax free cash soon to be taken with the initiation of the defined benefit pension would just be added to the previous SIPP tax free cash and be counted towards the maximum of the £268,275 tax free cash available to me.

I am intending later this year to crystallise more of the available uncrystallised SIPP to erode what will be left of the maximum tax free limit of £ 268,275.

Would this sequence require any specific certificate as I had assumed all would be straightforward? 

Albermarle

JamesP8 said:

dunstonh said:

2) And I have made a drawdown which occured this April after the new rules introduced, again   with a tax free elemenmt of 25%

As mentioned above, this prevents you from applying for a certificate.  You must apply for the certificate before a BCE occurs after 6th April 2024.

Do I now simply add up the total of all the tax free I have taken in each drawdown and deduct from the new limit of  £268,275 to work out what allowance I have left?

No.  You have lost that option.   You are now limited to using the lifetime allowance figures.

Remaining lump sum allowance = £268,275 – (25% x previously used % of lifetime allowance on 5 April 2024 x £1,073,100).

I'd be most grateful for some added clarity here please. My position is that I had crystallised a percentage of the Lifetime Allowance pre 6th April 2024, via my SIPP, taking 25% tax free at that time.

I am now hoping very shortly to initiate a defined benefit pension (so post 6th April 2024) and take an element of the offered tax free cash. My understanding was that the tax free cash soon to be taken with the initiation of the defined benefit pension would just be added to the previous SIPP tax free cash and be counted towards the maximum of the £268,275 tax free cash available to me.

I am intending later this year to crystallise more of the available uncrystallised SIPP to erode what will be left of the maximum tax free limit of £ 268,275.

Would this sequence require any specific certificate as I had assumed all would be straightforward? 

AFAIK, it should be straightforward.

The transitional certificate comes into play if you have previously taken a pension which used a % of LTA, but you did not take any tax free cash. This can happen with a DB scheme for example, where the max pension was taken with no TFC.
With transitional certificate this TFC will still be available, if you have sufficient DC funds to take advantage of it.
There are I think other niche areas where a certificate would be useful as well. 

FIREDreamer

As I posted on another thread, the certificate looks like this …

JamesP8

Thanks to you both for your input, which is very helpful.