Lifetime Allowance to Lump Sum & Death Benefits Conversion??

Fermion

Would appreciate some guidance as to how the conversion factors work as I've had a strange message from HL having just converted £300K of my crystalised pension pot into an Annuity.

I retired in 2015 and fully crystalised my pension pot in 2021 taking the full 25%. On reaching 75 HL published the following figures regarding LTA:-
Total Drawdown Fund value £967,672
Fund after tax free cash £725,754 (viz. £241,918 tax free cash)
Fund at age 75 £830,242
Additional Std Lifetime Allowance used at 75- 9.73%
Total Std Lifetime Allowance used 87.41%

However after processing the £300K Annuity, HL sent me a secure message saying that I have used a total of £208,475 of my lump sum allowance and £208,475 of my death benefit allowance.

I queried this figure but HL said they are correct as on the 6th April 2024 Lump Sum and Lump Sum & Death Benefits Allowance replaced the Lifetime Allowance and the percentage was replaced by a monetary value and a conversion of the percentage used was needed.  They said that as the Lifetime Allowance has been different in past years this affected  the calculations.

Can one of the experts explain how this works? It's as clear as mud to me!

DRS1

I won't be much help but when I bought an annuity the amount set against my LSDBA was only the amount of the lump sum taken at that time (not what was spent on the annuity).  So I don't think the £208475 figure has anything to do with the £300k.

I am wondering if the amount of the LTA was higher when you took your TFC than the LSDBA is now - so they are applying a percentage to a lower figure and coming up with  £208475 instead of £241918?

RogerPensionGuy

An interesting question, I was previously a little paranoid about the LTA, the link below is a bit long winded, but may explain a few bits of how it works. 

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Lump sum allowance (LSA) and LSDBA - Royal London for advisers https://share.google/4uMkxY5SRj5UPfcOA

DRS1

Just looked at old LTA figures.  In 2020/1 and 2021/2 the LTA was the same as the LSDBA is now so my earlier suggestion does not work.

If we go back to 2014/5 the standard LTA was £1250000 which might be roughly the right figure for my suggestion to work but that would be too early if you did not take anything until 2021.

I don't suppose you had some protection for the LTA?  Fixed Protection 2016 perhaps?

Fermion

DRS1 said:

Just looked at old LTA figures.  In 2020/1 and 2021/2 the LTA was the same as the LSDBA is now so my earlier suggestion does not work.

If we go back to 2014/5 the standard LTA was £1250000 which might be roughly the right figure for my suggestion to work but that would be too early if you did not take anything until 2021.

I don't suppose you had some protection for the LTA?  Fixed Protection 2016 perhaps?

I took the majority of my 25% tax free sum on the 01/12/2015 and you are correct the LTA was £1,250,000. I took further small tax free sums on 04/21 and 06/21 (6years x £3600  further pension investments). So yes I can see that might be the reason.