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    • derek1957
    • By derek1957 21st Jun 18, 3:53 PM
    • 2Posts
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    derek1957
    LTA questions
    • #1
    • 21st Jun 18, 3:53 PM
    LTA questions 21st Jun 18 at 3:53 PM
    I might be fortunate when I retire in 4 years to have a sum likely to be very close to the Life Time Allowance (LTA) on reaching the age of 66 in a defined contributions scheme only, I have no defined benefits pension scheme apart from a survivors spouse pension should my wife die before me.

    However I am still a little confused on exactly how this LTA works and would be grateful for opinions on what I have asked.

    I was told that the LTA in not just the maximum you can hold in a fund without incurring the excess charge on any withdrawals, but is also the maximum you can draw down from your pension fund as a percentage of that annual LTA over the life time of any withdrawals.
    Irrespective for this question any tax implication, if I was to withdraw in an uncrystallised form 4% annually of the LTA for each year, it would mean in 25 years I would have used all my lifetime allowances. i.e. 25 years of withdrawals x 4% = 100% of the LTA. Would this be correct?

    If the above is correct would this then mean after 25 years that any further withdrawals would be subject to the excess charge of 25% on any withdrawals as income or 55% of the cash sum, which would a bit harsh if I manged to live beyond the 25 years from the start of taking withdrawals at age 66. Can anyone comment on whether this is in fact correct?

    For the purposes of Inheritance Tax (IHT) is it correct that the remaining fund in my pension should if I die after the age of 75 after my wife, that the remaining fund can be passed to my children equally free of IHT, providing the funds are placed in the childrenís own private pension funds? Or will only the remaining funds of my unused LTA only be free of IHT if placed in the childrenís own private pension funds and the remaining funds subject to tax at the childrenís nominal tax rates.

    Whilst I applaud the pensionís freedoms in the new rules, they have equally posed more question than answers which donít appear to be as straight forward as I first thought.

    Derek
Page 2
    • Doglegger
    • By Doglegger 5th Jul 18, 1:56 AM
    • 24 Posts
    • 10 Thanks
    Doglegger
    Thanks to all for the responses. Helped clear up the muddy waters of what is supposed to be a simpler system.
    Originally posted by derek1957
    Unfortunately not for me it hasn't so was wondering if anyone could clear this slight twist on the situation up for me.
    Say, for simplification, LTA still at £1M and at 55 crystallise all from £400k DC pot & HMRC valuation of £600k for DB scheme. At 60 another DB kicks in with HMRC valuation of £50k. How would this DB actually look in payment as far as tax on it was concerned? Would HMRC take 25% from each payment of the second DB and then tax again at my nominal rate?
    • ffacoffipawb
    • By ffacoffipawb 6th Jul 18, 7:16 AM
    • 2,500 Posts
    • 1,666 Thanks
    ffacoffipawb
    Unfortunately not for me it hasn't so was wondering if anyone could clear this slight twist on the situation up for me.
    Say, for simplification, LTA still at £1M and at 55 crystallise all from £400k DC pot & HMRC valuation of £600k for DB scheme. At 60 another DB kicks in with HMRC valuation of £50k. How would this DB actually look in payment as far as tax on it was concerned? Would HMRC take 25% from each payment of the second DB and then tax again at my nominal rate?
    Originally posted by Doglegger
    And if that final DB was wholly GMP, what then?
    • Doglegger
    • By Doglegger 6th Jul 18, 8:16 AM
    • 24 Posts
    • 10 Thanks
    Doglegger
    And if that final DB was wholly GMP, what then?
    Originally posted by ffacoffipawb
    It's from the AFPS_75 scheme. Really could not tell you if there's any GMP element to it! How would that affect it? Cheers.
    • Silvertabby
    • By Silvertabby 6th Jul 18, 9:57 AM
    • 3,263 Posts
    • 4,735 Thanks
    Silvertabby
    !!!8220; And if that final DB was wholly GMP, what then?
    Originally posted by ffacoffipawb
    It's from the AFPS_75 scheme. Really could not tell you if there's any GMP element to it! How would that affect it? Cheers.
    Originally posted by Doglegger

    If your Armed Forces service was any time between 1978 and 1997 then you will have a GMP, but it's unlikely to be all GMP.
    • ffacoffipawb
    • By ffacoffipawb 6th Jul 18, 10:41 AM
    • 2,500 Posts
    • 1,666 Thanks
    ffacoffipawb
    It's from the AFPS_75 scheme. Really could not tell you if there's any GMP element to it! How would that affect it? Cheers.
    Originally posted by Doglegger
    Just quering if GMP can be reduced to pay LTA tax.
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