Lifetime Allowance Statement

Goober11

TheGreenFrog said:

Do you have scheme protected tax-free cash with your DB scheme?

Thanks, that's a good question. I must admit I am not sure what "scheme protected tax-free cash" is. This sounds like something that you might get within an occupational DC style scheme. For instance I have an old workplace DC pension that has protected enhanced TF cash greater than the usual 25%.

My DB pension offered me 2 options: the default lump sum or an enhanced lump sum in exchange for some of my annual pension. I went for the default.

Goober11

Marcon said:

PropertyGuru_Wannabe said:

Goober11 said:

The LTA has been abolished. You could still be impacted by the Lump Sum Allowance - I wonder if that's what you have in mind? If so, you won't get a tax bill; it will just limit the amount of tax free cash you can take from all your pensions to a grand total of (currently) £268,275.

Thanks for the speedy response and for putting my mind at ease. My lump sum is just under £70k which I am told is not a straight 25% TF sum like on DC schemes. So presumably that means I have an extra circa up to £200k of TF cash I could draw from the DC pots assuming the values allowed?

You already stated that your lifetime allowance statement for your DB pension is £500,000 which is about right from your £70k lump sum.  The LSDBA is currently £1,073,100.  As far as I understand, you have £573,100 allowance remaining and therefore could take out £143,275 tax free lump sum but please confirm with a pension expert.

Already answered above. The Lump Sum Death Benefit Allowance isn't the same thing as the LSA (the clue is in the name!), and it's the latter which OP asked about.

£268,275 - £70,000 = £198,275.00 

Thanks, I am grateful for these contributions. My main concern now going forward in retirement is to consider whether there is any benefit to start drawing funds from my SIPP to transfer to ISAs (both the wife's and my own)?

TheGreenFrog

Goober11 said:

TheGreenFrog said:

Do you have scheme protected tax-free cash with your DB scheme?

Thanks, that's a good question. I must admit I am not sure what "scheme protected tax-free cash" is. This sounds like something that you might get within an occupational DC style scheme. For instance I have an old workplace DC pension that has protected enhanced TF cash greater than the usual 25%.

My DB pension offered me 2 options: the default lump sum or an enhanced lump sum in exchange for some of my annual pension. I went for the default.

If your combined tax-free cash entitlement is or may be over the LSA then you should certainly check whether the TFC of any of your schemes is protected.  The following gives an idea of the potential benefit (in theory you could max out your TFC on your non-protected schemes and then take the protected TFC on top as long as you have sufficient LSDBA left):

https://adviser.royallondon.com/technical-central/pensions/benefit-options/protection-of-scheme-specific-tax-free-lump-sum/

Edit:  this link has I think a better explanation.  See in particular the last para.

https://techzone.aberdeenadviser.com/public/pensions/Tech-guide-scheme-specific-tfc#anchor_4

DRS1

PropertyGuru_Wannabe said:

Thanks Marcon.  This is new to me and I love learning new things every day.  This would definitely benefit my position however have a question if I may.  If the OP did not opt to the take the DB lump sum and just chose to take the pension, would that have zero affect to the Lump Sum Allowance and therefore they could take the full  25% TFLS of £268,275 from the DC Pension?

Many thanks for this in advance.

I think that is right but you would need a DC pension worth over £1073000 to do that (most DC schemes will only allow 25% TFC).  There may be some clever things you can do if you have AVCs as part of the DB scheme but I am assuming we are talking about completely separate DB and DC schemes. 

Marcon

PropertyGuru_Wannabe said:

Thanks Marcon.  This is new to me and I love learning new things every day.  This would definitely benefit my position however have a question if I may.  If the OP did not opt to the take the DB lump sum and just chose to take the pension, would that have zero affect to the Lump Sum Allowance and therefore they could take the full  25% TFLS of £268,275 from the DC Pension?

Many thanks for this in advance.

If they have taken no tax free cash from their DB scheme, then normally someone could take 25% tax free cash from their DC pensions up to a grand total of £268,275, with the amount of tax free cash being lower if the value of the DC pots is less than £286,275 x 4 = £1,073,100.

See post above re 'protected tax free cash' - there's rarely a nice simple answer in pensions!

Edit - forgot to mention 'small pots', which could add a little bit more tax free cash. See https://www.litrg.org.uk/pensions/pension-withdrawals/small-pensions and read the section headed 'Small Pots'.

DRS1

Marcon said:

PropertyGuru_Wannabe said:

Goober11 said:

The LTA has been abolished. You could still be impacted by the Lump Sum Allowance - I wonder if that's what you have in mind? If so, you won't get a tax bill; it will just limit the amount of tax free cash you can take from all your pensions to a grand total of (currently) £268,275.

Thanks for the speedy response and for putting my mind at ease. My lump sum is just under £70k which I am told is not a straight 25% TF sum like on DC schemes. So presumably that means I have an extra circa up to £200k of TF cash I could draw from the DC pots assuming the values allowed?

You already stated that your lifetime allowance statement for your DB pension is £500,000 which is about right from your £70k lump sum.  The LSDBA is currently £1,073,100.  As far as I understand, you have £573,100 allowance remaining and therefore could take out £143,275 tax free lump sum but please confirm with a pension expert.

Already answered above. The Lump Sum Death Benefit Allowance isn't the same thing as the LSA (the clue is in the name!), and it's the latter which OP asked about.

£268,275 - £70,000 = £198,275.00 

Even though they are different things am I wrong to think that in this case what is set off against them is the same figure (ie £70k)?  So you would not be setting off £500k against the LSDBA?

Albermarle

Goober11 said:

Marcon said:

PropertyGuru_Wannabe said:

Goober11 said:

The LTA has been abolished. You could still be impacted by the Lump Sum Allowance - I wonder if that's what you have in mind? If so, you won't get a tax bill; it will just limit the amount of tax free cash you can take from all your pensions to a grand total of (currently) £268,275.

Thanks for the speedy response and for putting my mind at ease. My lump sum is just under £70k which I am told is not a straight 25% TF sum like on DC schemes. So presumably that means I have an extra circa up to £200k of TF cash I could draw from the DC pots assuming the values allowed?

You already stated that your lifetime allowance statement for your DB pension is £500,000 which is about right from your £70k lump sum.  The LSDBA is currently £1,073,100.  As far as I understand, you have £573,100 allowance remaining and therefore could take out £143,275 tax free lump sum but please confirm with a pension expert.

Already answered above. The Lump Sum Death Benefit Allowance isn't the same thing as the LSA (the clue is in the name!), and it's the latter which OP asked about.

£268,275 - £70,000 = £198,275.00 

Thanks, I am grateful for these contributions. My main concern now going forward in retirement is to consider whether there is any benefit to start drawing funds from my SIPP to transfer to ISAs (both the wife's and my own)?

This is a totally different question, so would be better to start a new thread and include as many details as possible.
It is not an uncommon question by the way.

Marcon

DRS1 said:

Marcon said:

PropertyGuru_Wannabe said:

Goober11 said:

The LTA has been abolished. You could still be impacted by the Lump Sum Allowance - I wonder if that's what you have in mind? If so, you won't get a tax bill; it will just limit the amount of tax free cash you can take from all your pensions to a grand total of (currently) £268,275.

Thanks for the speedy response and for putting my mind at ease. My lump sum is just under £70k which I am told is not a straight 25% TF sum like on DC schemes. So presumably that means I have an extra circa up to £200k of TF cash I could draw from the DC pots assuming the values allowed?

You already stated that your lifetime allowance statement for your DB pension is £500,000 which is about right from your £70k lump sum.  The LSDBA is currently £1,073,100.  As far as I understand, you have £573,100 allowance remaining and therefore could take out £143,275 tax free lump sum but please confirm with a pension expert.

Already answered above. The Lump Sum Death Benefit Allowance isn't the same thing as the LSA (the clue is in the name!), and it's the latter which OP asked about.

£268,275 - £70,000 = £198,275.00 

Even though they are different things am I wrong to think that in this case what is set off against them is the same figure (ie £70k)?  So you would not be setting off £500k against the LSDBA?

I yearn for the day when I can answer a simple question with a simple answer - in pensions, 'yes' and 'no' almost invariably come with caveats. Good explanation at https://techzone.aberdeenadviser.com/public/pensions/LSDBA-tech-guide

Goober11

This is a totally different question, so would be better to start a new thread and include as many details as possible.
It is not an uncommon question by the way.

Yes - apologies. I will do a search on this forum to see if SIPP to ISA transferring has been covered before rather than start a new thread.

Albermarle

Goober11 said:

This is a totally different question, so would be better to start a new thread and include as many details as possible.
It is not an uncommon question by the way.

Yes - apologies. I will do a search on this forum to see if SIPP to ISA transferring has been covered before rather than start a new thread.

The search function is not that grea,t and the subject tends to come up as part of an overall retirement plan, rather than as a specific subject.
I would just start a new thread, with as many details as possible.