Confusing message from Teacher Pension

2childmum2

I have recently applied for my teacher's pension which I am due to receive next March, and have received a very confusing letter via their messaging system. 

For background info - 

I am due to receive a lump sum of £14 715.17 and an annual pension of £4905.05

Last tax year I opened a SIPP with HL and paid in £2880.00.  Tax relief of £720 was add to this and then on 29/08/24 I took out a UFPLS of £3500.00.

Apart from State Pension, these are the only pension arrangements I have.

The application form for my Teachers' Pension included a box to tick if I had taken or planned to take any money out of a pension.  I ticked this box as I had taken the money from the SIPP.  At no point did it ask how much money I had taken.  I had to fill in a LSA assessment form, which I did and posted the next day.

I have now received the following, which I don't understand at all.  I don't think they would have received the LSA form before sending it to me.

'The Finance Act 2004 introduced a change to the tax laws applying to all UK tax privileged pensions with effect from 6 April 2006. As part of this change, any benefits above the LTA will be subject to a tax, known as an 'LTA charge', unless you hold a valid protection certificate from HM Revenue and Customs (HMRC). In the TPS, the LTA charge is applied to any pension in excess of the LTA at the rate of 25%. TP will pay the tax to HMRC and reduce the pension accordingly. You have informed us on your application that your total benefits payable from the TPS and any other benefits already in payment or about to come into payment exceed £35,000 per annum. As you are close to the LTA, we require this information to determine whether the LTA charge is payable.'

I am very confused - I am not going to receive anything like £35000.00 an annum. I though the LTA had been abolished and I don't have anything like that money in a pension fund anyway. And what does receiving £35000.00 have to do with the LTA anyway?

 I would be grateful if someone could explain what is going on - thank you!

Silvertabby

Ah, another example of a misplaced decimal point, but this time with the added FUBAR of the data being input to the wrong box!  Just ring - or write to - TPA and tell them that they have input the wrong information, and clarify (in text as well as numerals!) the amount of tax free cash you have taken from your SIPP.

You are nowhere near the LTA/tax free cash limit but, by using £35,000 as your SIPP annual pension (you wish!) TPA have 'calculated' that you may have taken close to the maximum tax free cash limit of £263K

2childmum2

I hadn't told them how much money I had taken from the SIPP at the point they sent the letter, only ticked the box that said I had taken some money from a pension so I don't think it can be that.
Hopefully they will receive the LSA form and it will get sorted out based on that, but I may write to them to clarify the situation as well.

I still don't understand how having an income of 35000 means I may have taken close to the tax free cash limit. Just out of interest can someone explain that to me? Thank you!

Silvertabby

Because an annuity (pension from a SIPP) of £35K per year would have needed a substantial pot of money.  TPS have assumed that you took the maximum possible tax free cash, and that this was pushing the maximum £263K. 

I know it's annoying, but you've nothing to worry about.  Just ensure that TPS have the correct information before they start paying your pension.      

2childmum2

Thank you for the explanation. I still don't know where they got the £35000 from though!!

I'll write to them and hopefully it will be sorted by next March. I want to use a chunk of the money to visit my son in New York!

Silvertabby

2childmum2 said:

Thank you for the explanation. I still don't know where they got the £35000 from though!!

I'll write to them and hopefully it will be sorted by next March. I want to use a chunk of the money to visit my son in New York!

Your SIPP lump sum of £3,500 with an errant decimal point and misread as 'annual pension'.  That said, I'd have thought that an error of that magnitude would have been spotted at the checking stage....

2childmum2

I hadnt told them how much I had taken at the point they sent the letter. The application just had a box to tick to say I had taken something from a pension and then I had to send a form with the details of what I had taken. The definitely didn't have the form when I received the letter - it was still sat by my front door waiting to be posted!

DRS1

Maybe they got you mixed up with someone else?  Best thing to do is phone them and ask.  On here we are just speculating.
You are right though - the LTA is a thing of the past.