SIPP above old LTA

ClockBear

Say that I have SIPP above the old LTA (Life Time Allowance).
Also say that I crystallise enough to receive the maximum tax free cash - I believe that it’s called the LSA (Lump Sum Allowance = 25% of old LTA).

The crystallised amount less the LSA is put into a drawdown pot by my SIPP provider (AJ Bell), for later withdrawal and taxation at my marginal rate.

Does the remaining SIPP balance stay uncrystallised?

Presumably this would mean that if the Government ever increases the LSA, I could crystallise more of my remaining SIPP balance to receive more tax free cash?

Have I got this correct?

Many thanks for your attention.

DRS1

Someone has posted on here that they did exactly that for for exactly that reason.

They also mentioned that their provider asked them if they wanted to crystallise the whole pot - so be prepared for that question (or watch out in case they assume that is what you want).

I don't know how AJBell charges you but some places have separate charges for crystallised and uncrystallised funds so you may be increasing what you pay if you do it.

And someone has also suggested that if you have used up 100% of the current LSA then if the LSA was increased you wouldn't get the benefit of any increase. Personally I don't think that is how it would work but then I don't think the LSA is going to be increased.

Albermarle

I don't know how AJBell charges you but some places have separate charges for crystallised and uncrystallised funds so you may be increasing what you pay if you do it.

If you have only OEIC funds than you pay 0.25% platform fee, this would apply to all uncrystallised and crystallised pension money.

If you only have shares; ITs and ETFs, the fee is capped at £120 pa

Two of AJ Bells competitors have similar caps. One ( HL) applies the cap separately to uncrystallised and crystallised funds, and the other one ( Fidelity) does not. I think AJ Bell does not as well, but wise to check.

ClockBear

Thanks - I only have ETFs and ITs so capped at £10 per month. I already have some crystallised funds and can confirm that I’m not being charged extra.

zagfles

You could also create 3 "small pots" £10k or less which would get you more tax free cash. Discussed here a lot.

ali_bear

https://forums.moneysavingexpert.com/discussion/6683253/sipp-above-old-lta

If you have that much it may make sense to seek some professional advice, and to think twice before making any hasty or rash moves with your substantial retirement funds.

RogerPensionGuy

To the OP for information.

I took max TFLS out of a DB pension a few years back as the commutation rate was very good.

Then last October I took my remaining TFLS out of a DC SIPP just incase any unlikely changes occured.

When I took that TFLS out of the DC SIPP, I requested only the required crystallised funds were put in a crystallised pot, they were confused by my request, I advised just in case any changes occurred whereby I may get more TFLS, they agreed it was a fair call at no costs or issues to anyone.

The poss 3 X 10k or less small pot rules do look very helpful.

The constant tinkering of pensions has made me do more guessing that looking at them as they are today, yesterday or tomorrow, it's a silly situation in my opinion.

I also feel people who saved diligently including pensions are seen as low hanging tax/whatever fruit and I bear this in mind when I make pension/investment decisions.

Maybe the LTA/LSA or small pot rules will change for the better I live in hope.

ClockBear

Thank you for your comments Roger.

I’ve recently requested the withdrawal of the remaining value of my LSA yesterday. It leaves some of my SIPP uncrystallised - I did this by requesting a specific amount of TF money, that I had previously checked with AJ Bell.

Whilst, I do think that it is unlikely that this government will reduce the available tax free cash in the short term, I do believe that this course of action (i.e. taking the TF cash) is a mitigation to the current asymmetric risk to my retirement finances, and I could not rule out the possibility that it could happen in the Autumn Budget.

I’ll have to look into the small pot rules to see if I can use them.

Thanks again

DRS1

HL are known for allowing you to split off three small pots from a bigger pension. I don't know about AJBell.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82142534#Comment_82142534

Maybe the LTA/LSA or small pot rules will change for the better I live in hope

If the small pots rule is changed it will most likely to tighten up the rules, so as to block this trick/loophole of splitting off small pots from larger ones.

zagfles

https://forums.moneysavingexpert.com/discussion/comment/82143038#Comment_82143038

Yes the rules seem to be an anachronism from the days when nearly everyone bought an annuity with their pension, and a small pot would buy a trivial annuity. But now that UFPLS is available there doesn't seem any reason for the small pots rule, just let people take it as UFPLS.