25% Tax Free, DB crystallised and Transitional tax free Certs, 2016 Protection

toesonthenose

Appreciate I might need formal advice on this but at this stage Im trying to establish if I do.

Im lucky/worked hard successful career, invested wisely in SIPP as well as have DB pensions started 10 years ago.  Took out Fixed Protection 2016  in 2018 given growth in value of invested funds in SIPP.

Started taking benefits from DB in 2015, had the option of taking some of the DB as tax free lump sum - I didnt take any tax free £ at the time.

Of course as a result in the change in legislation the DB pension provided me with standard calculation assuming that I had taken a tax free lump sum. Lets say £50k if a number is needed.

Im doing phased drawdown from SIPP taking 25% as tax free.  Have already done one drawdown but not taking any funds from crystallised balance.

It seems to me that I would have a higher tax free LSA left by getting the transitional tax free certificate that says I had £0 tax free rather than the standard calc from DB provider.  

Any views on this?

The other question is timing.  Have I missed the boat by not getting the TTFC now rather than earlier.

Of course there is a lot of uncertainty given budget speculation but thoughts based on as it is now rather than what it might be would be extremely helpful.

Tks all.  

dunstonh

Have you crystallised and taken any tax-free cash since 6th April 2024? If yes, you have missed the boat.  If no, then you have not.
There are other qualifying rules, but if you have taken any from April 2024, it kills the option outright.

toesonthenose

Tks for the prompt answer.  Answer to that is no, so the other QRs come into play.

DRS1

This was a note on a form when I took a TFLS earlier this year

"If you took any pension benefits, or transferred the value of any pension benefits overseas, between 6th April 2006 and 5th April 2024, you can ask your pension provider to issue a ‘transitional tax-free amount certificate’. In certain circumstances, this could increase the amount of your pension benefits that can be paid tax-free but it could also reduce this.

A certificate may benefit you in the following circumstances where between 6th April 2006 and 5th April 2024:

• You took benefits where no tax-free lump sum was paid, or a tax-free lump sum was paid but this was less than 25% of the benefits taken.

• You turned age 75 without taking all your pension benefits.

• You took benefits when the Lifetime Allowance was lower than £1,073,100 (between 6th April 2016 and 5th April 2020).

• You transferred benefits not in payment to a Qualifying Recognised Overseas Pension Scheme.

• You took benefits from a disqualifying pension credit* in respect of pension sharing on divorce.

This is not an exhaustive list, and we can’t give you advice on when a certificate may be beneficial to you or not. You should take advice from a financial adviser.

Once a certificate has been granted you can’t cancel this. If you want a certificate, it must be requested before you take your first tax-free lump sum on or after 6th April 2024.

* A disqualifying pension credit is where the pension credit transfer on divorce is from previously crystallised funds which means the person receiving the transfer can’t take a tax-free lump sum from those funds."

It sounds as if you could benefit from a TTFAC but it must be worth looking up those situations where it could reduce your tax free cash.

I suspect your calculation may get complicated if you have taken two bites out of the LTA but only had a lump sum on one of them.

Albermarle

I took a DB in 2021 with no tax free lump sum.
I had DC pensions I had not taken anything from, so last year applied for TTFC.
I was not sure whether to ask the DB provider, but decided not to as they were hopelessly incompetent when starting the DB pension.
So I asked my SIPP provider, who seemed a bit confused at first  but then said they were actually in the process of producing an application form. Filled that in with some copies of correspondence about my DB pension, and got the certificate.
Took out some tax free cash this year, and only this has counted towards my lump sum allowance. There is zero contribution from the DB pension.
So it worked ! So far my DC pensions are not quite big enough for this to make any difference, but in the longer term it should.

toesonthenose

Thanks.  Its more complex as I have 2 DB pensions.  In both cases I didnt take a tax free lump sum.  My understanding therefore is that the certs should show tax free sum taken would be £0- as opposed to the £ based on the assumed value!

Reading a bit more who the hell do I apply to for the certificate, the two DB providers or the SIPP provider who knows about. It looks like it is the SIPP provider as they are the people Im want to crystalisse more of my non-crystalised funds.

DRS1

I think it is whoever you get the first TFLS from after April 2024 (and you apply to them for the certificate before you take the TFLS)

DRS1

This may be useful (you may have seen it)
Transitional tax-free amount certificates - Royal London for advisers

toesonthenose

Sorry this is turning into a realtime thread.  I apply to only one provider and have to provide them with all of the information which Im meant to have kept without knowing that the Gov were going make this so complex retrospectively. 

Now going to see if I can get the 2 DBs to provide me with the hard facts that I didnt take any tax free cash to supply to the SIPP.

Now to think through the implications of what Rachel from Accounts might add to the mix!

Oh joy such fun.  

Albermarle

toesonthenose said:

Sorry this is turning into a realtime thread.  I apply to only one provider and have to provide them with all of the information which Im meant to have kept without knowing that the Gov were going make this so complex retrospectively. 

Now going to see if I can get the 2 DBs to provide me with the hard facts that I didnt take any tax free cash to supply to the SIPP.

Now to think through the implications of what Rachel from Accounts might add to the mix!

Oh joy such fun.  

Presumably you had communications from the DB providers when you started taking the pensions. It should be pretty obvious from those that you did not take any tax free cash.

Be aware that forum rules forbid discussion of politics, theoretically at least.
In reality discussing pensions and tax etc it is difficult to avoid politics altogether, but comments like 'Rachel from Accounts' are best avoided.

DRS1

toesonthenose said:

Sorry this is turning into a realtime thread.  I apply to only one provider and have to provide them with all of the information which Im meant to have kept without knowing that the Gov were going make this so complex retrospectively. 

Now going to see if I can get the 2 DBs to provide me with the hard facts that I didnt take any tax free cash to supply to the SIPP.

Now to think through the implications of what Rachel from Accounts might add to the mix!

Oh joy such fun.  

Did they provide you with information showing what percentage of the LTA you had used?  Might it be obvious from that?