Author Topic: Making sure you don't exceed the Pension LTA  (Read 5898 times)

MisterA

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Re: Making sure you don't exceed the Pension LTA
« Reply #50 on: February 10, 2021, 06:13:40 AM »
It is something to be aware of.  I had assumed I was safely under, but using the 4% real growth assumption up thread, then in 12 years (when I can take it) my pension could be worth £1.3m.  Still, it's a nice problem to have I guess.  I'm using my ISA allowances, and a have been a top rate taxpayer - so I'm looking it as really just a deferral of tax.

Anyway, it's brave to make a bet on what the threshold will be or what the system will look like in 10 years time, let alone 20.  But I guess we can only ever plan based on what the rules are now.  I'm not going to put any more in, but also it's not a situation I would lose sleep over!
If you have a working partner, set up a SIPP in their name, and contribute to it on their behalf. This eliminates (or doubles) the LTA, and has other lucrative tax advantages. It's a no-brainer.

If you're concerned about what might happen if you split up, just remember that half of your current pension is most likely theirs anyway.
« Last Edit: February 10, 2021, 06:17:51 AM by MisterA »

LightTripper

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Re: Making sure you don't exceed the Pension LTA
« Reply #51 on: February 10, 2021, 06:49:38 AM »
I have a partner but we're not married and he is also veering towards his LTA (nice problem to have, I know!)

I think I may just be one of those people who should just PTDT (pay the damn tax!)  I think we've done all the sensible/proportionate things not to be taxed needlessly, and just fall squarely into the category of people who have enough money that we should pay it.

Still, I find it hard to stop myself from checking whether there are ways to optimise any given problem, so it's always nice to understand the rules fully!

MisterA

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Re: Making sure you don't exceed the Pension LTA
« Reply #52 on: February 10, 2021, 10:45:16 AM »
I have a partner but we're not married and he is also veering towards his LTA (nice problem to have, I know!)
Wow, well done.

shackleford

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Re: Making sure you don't exceed the Pension LTA
« Reply #53 on: March 02, 2021, 08:56:04 AM »
Hi everyone.

This seemed like the most appropriate thread to link and talk about this. 

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/960034/NMPA_consultation_2021.02.10.pdf

The consultation paper for raising the minimum pension access age from 55 to 57 in 2028.  This increase has been talked about for a while since I believe 2014 when the government initially said it would be happening.  However this paper gives some detail that is of interest to me - I'm 41 next month - and I think will also be of interest to others on here.  Basically the plan outlined is that the access age will increase from 55 to 57 in 2028 as planned, but that there will be a protection regime established for people already in existing pension schemes.  Article 2.5 says that:

"The government proposes to offer a protection regime for the increase to the NMPA in 2028 for all types of registered pension scheme. This would mean that an individual member of any registered pension scheme (occupational or non-occupational) who has a right under the scheme rules at the date of this consultation to take pension benefits at an age below 57 will be protected from the increase in 2028."

This is potentially great news especially for those of us who assumed it was a done deal and that we couldn't access our pensions before turning 57.  It is only a consultation paper, and there is some stuff in there about individual schemes opting to increase their access ages, but having read it a few times I think my interpretation is correct - the proposal is a wide-ranging protection to anyone in an existing scheme as of Feb 2021 which currently has the normal access age of 55, providing they remain in that scheme.  Personally I've got most of my pension in my workplace DC pot but I also have a much smaller pot in a Fidelity SIPP so I'm now thinking about getting two years' worth of expenses into the latter and hoping that Fidelity don't opt to increase to 57, and that this means I can get into the Fidelity pot aged 55. 

Have I got this wrong?  There are certainly some naysayers on other boards but I think I've got it right.  IANAL, DYOR, YMMV, IMHO, etc etc.




PhilB

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Re: Making sure you don't exceed the Pension LTA
« Reply #54 on: March 03, 2021, 01:53:16 AM »
As always, the Devil will be in the detail.

I read it that you should be okay as long as a) your scheme specifically states an access age of 55, and b) you are happy with the options that scheme has for taking benefits as you will lose protection if you transfer out.

inventiontime

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Re: Making sure you don't exceed the Pension LTA
« Reply #55 on: March 03, 2021, 03:41:10 AM »
This is something I had feared as a 30-year-old with many years of pension growth remaining. I have analysed how a marginal contribution of £100,000 that falls entirely above the lifetime allowance would leave me in a number of scenarios. I have written a blog post on this, and made my spreadsheet available at: https://inventiontime11091.wixsite.com/website/post/should-i-invest-into-a-pensions-above-my-life-time-allowance


I hope this can be a useful resource for this thread, but as I am not a financial professional, I would really appreciate your feedback to help make it the useful resource that it can be. Do you think my assumptions and calculations are correct?

Thank you so much in advance for your help!

helloyou

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Re: Making sure you don't exceed the Pension LTA
« Reply #56 on: March 03, 2021, 04:09:56 AM »
I've recently decided it makes most sense to add as much as possible into the pension and not worry about the LTA.

My philosophyy is 2 folds:
- It's an insurance in case the market goes into bear mode. We recently seen the big stock move due to fear of inflation and rate rise. If we go into a proper crash then bear market, it can take 25 years to go back to previous high. See the Nikkei stock market for example. If we enter this phase, it's a great thing to have this protection.
- I can use this pot to invest in higher risk, higher reward stocks. I consider buying in them with a 20% discount from taxes.

What's wrong with reaching the LTA anyway, if it increases my chance to never worry about lack of money! 

vand

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Re: Making sure you don't exceed the Pension LTA
« Reply #57 on: March 03, 2021, 12:06:20 PM »
Well you're going to have a somewhat easier time to do so now @helloyou. The LTA freeze for the next 5 years will have the effect of reducing its by roughly 10% in real terms. And with 20+ years until access... do you really think this is the last time this will be done? Fiscal drag has been a tool of many a chancellor to claw more taxes from people who don't realise it.
« Last Edit: March 03, 2021, 12:08:49 PM by vand »

helloyou

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Re: Making sure you don't exceed the Pension LTA
« Reply #58 on: March 03, 2021, 01:09:55 PM »
Well you're going to have a somewhat easier time to do so now @helloyou. The LTA freeze for the next 5 years will have the effect of reducing its by roughly 10% in real terms. And with 20+ years until access... do you really think this is the last time this will be done? Fiscal drag has been a tool of many a chancellor to claw more taxes from people who don't realise it.

We know the gov is going to increase tax. Its no surprise. The LTA allowance is frozen for 5 years but so is income allowance... and corporation tax is increasing to 25%.

So do you prefer to pay your tax now or later? I much prefer doing it later if possible.

I just bought some gold and tech stock on my SIPP. Sounds like a very very bad choice as I'm down 10% in few days already.

Good thing these trade are tax free/discounted! I feel that doing that is the right choice... i only need to have safe retirement :)