Can this be correct regarding 25% tax free withdrawal?

RogerPensionGuy

I took TFLS out of both a DB and and a DC SIPP, it was simple.

The DB was offering a very nice commutation rate, so I elected max possible TFLS.

The DB paid out X £s.

I got the certificate from the DB scheme and gave it to the DC SIPP outfit.

They just minused the X£s on the certificate of the maximum possible TFLS/268K and paid out the difference and now I currently have no more TFLS available unless a government tinkers up the LSDBA before I consume that pot.

I'm guessing 99% the LSDBA will never increase in my lifetime, so I'm going to consume SIPP as I see fit these next few years I expect.

Cheers Roger.

BENNZ787

Perhaps the adviser is correct after all. Both Claude and ChatGPT say the following:

So the adviser's calculation of £178,275 remaining tax-free cash available from the DC pension is consistent with HMRC's current transitional framework.

This often surprises people because:

• They take no lump sum from the DB scheme.
• They still find that part of their LSA has been used.
• The effect is that the amount of tax-free cash available later from a DC pension is reduced.

Or is this duff info from 'the Ai'?

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82023394#Comment_82023394

When the LTA was abolished and the LSA was introduced, there was some confusion over people who had already started their DB pension and taken no lump sum.

Then a transitional system was put in place, so people who had previously taken a DB with no lump sum, could be registered as not having used any LSA. However this was not automatic and you had to be aware of it and know exactly what to do, and there was a time limit. So I guess many people who took a DB pension with no lump sum previously, still have had their LSA reduced.

That is probably what is confusing AI, and possibly your advisor.

For you it is not relevant, as you have not taken your DB yet, and if you do not take any lump sum then your LSA will not be reduced.

BENNZ787

Thanks very much for the answers but how do I go about confirming all this before I tell the advisor he's talking rubbish?

If they are wrong then this seems to be quite a serious error and I'm going to have to take the matter further. But obviously I have to be sure.

BikingBud

It would be entirely reasonable to request, in writing, that they explain it in much more detail as you understand that decrementing your tax free allowance when you have not taken any tax free lump sum is contrary to all resources you have reviewed.

If they continue to provide the same inaccurate advice then you have a clear head of complaint.

BENNZ787

https://forums.moneysavingexpert.com/discussion/comment/82023475#Comment_82023475

Thanks. Good idea.

DRS1

Or maybe ask "If I am never going to take any tax free cash from the DB Pension Scheme then can I use all of the Lump Sum Allowance for tax free cash from the DC Pensions?"

zagfles

https://forums.moneysavingexpert.com/discussion/comment/82023463#Comment_82023463

You could point the useless adviser at some of the many articles written by pension providers aimed at advisers, if you google something like "pension LSA LSDBA", for instance Lump sum and lump sum death benefit allowances - Royal London for advisers which explains it in detail.

In summary, taking a DB pension or any pension without any TFLS is not a "relevant benefit crystallisation event", and there is no need to check what LSA has been used, because it doesn't use any LSA. Only taking tax free lump sums (or things that include tax free lump sums like a UFPLS) use up the LSA.

Oh and don't trust AI, it's probably even worse than advisers😆Or maybe the adviser used AI