TFLS and The Pension Service
Posted: June 25th, 2019, 2:43 pm
A really good discussion with the PAS, here in all its glory:
PS Advisor: Hello. You're through to PS Advisor. How can I help?
Pheidippides: Hello - I am 54 and 55 in January next.
Pheidippides: I am very close to the LTA
I intend to take the full 25% TFLS near my 55th birthday.
How is my LTA affected as the remainder of my fund will (hopefully) continue to grow
PS Advisor: What do you mean by just taking the 25% tax free lump sum? What you will be able to do depends on the options your provider offers. Whatever you take out from your pension crystalises a percentage of your LTA until you have used up 100%
Pheidippides: About 30% of my LTA is in a DB pension scheme that I am not going to touch. The remainder is in a SIPP. If the numbers were:
DB = 155,000
SIPP = 900,000
TFLS = 225,000
therefore LTA becomes 830,000? and I calc as remaining SIPP value plus 20x annual DB current pension
PS Advisor: If you want to take 25% of your SIPP as the tfls, you can only do that by crystalising the whole £900k in your SIPP. That will crystalise just under 90% of your LTA.
Crystallising means no more contributing?
PS Advisor: No. It means taking out from the pension. You only get 25% of what you crystalise tax free. You cant just crystalise the tfls.
PS Advisor: It sounds like you should really be paying a financial advisor to go through your best outcome with.
OK - Thanks for the assist
PS Advisor: It is a complicated area and not one we can go into any detail on via this webchat.
Pheidippides: understood
PS Advisor: No problem. Bye.
Pheidippides: bye
This seems to be completely at odds with the process described very simply in AJ Bell's platform. I don't intend to take anything as income until TY 20/21 and that will be intending to maximize the tax-free and lower-rate tax bands to their fullest.
Some residual questions:
How is the LTA reassessed?
Having taken all the TFLS in one lump does future investment growth matter, or not 'til I'm 75?
If you are close to the LTA does maximizing your drawdown to the limit of the Higher Rate Tax make sense as you can then put any excess into an ISA to protect against ANY future tax?
Regards
Pheid
PS Advisor: Hello. You're through to PS Advisor. How can I help?
Pheidippides: Hello - I am 54 and 55 in January next.
Pheidippides: I am very close to the LTA
I intend to take the full 25% TFLS near my 55th birthday.
How is my LTA affected as the remainder of my fund will (hopefully) continue to grow
PS Advisor: What do you mean by just taking the 25% tax free lump sum? What you will be able to do depends on the options your provider offers. Whatever you take out from your pension crystalises a percentage of your LTA until you have used up 100%
Pheidippides: About 30% of my LTA is in a DB pension scheme that I am not going to touch. The remainder is in a SIPP. If the numbers were:
DB = 155,000
SIPP = 900,000
TFLS = 225,000
therefore LTA becomes 830,000? and I calc as remaining SIPP value plus 20x annual DB current pension
PS Advisor: If you want to take 25% of your SIPP as the tfls, you can only do that by crystalising the whole £900k in your SIPP. That will crystalise just under 90% of your LTA.
Crystallising means no more contributing?
PS Advisor: No. It means taking out from the pension. You only get 25% of what you crystalise tax free. You cant just crystalise the tfls.
PS Advisor: It sounds like you should really be paying a financial advisor to go through your best outcome with.
OK - Thanks for the assist
PS Advisor: It is a complicated area and not one we can go into any detail on via this webchat.
Pheidippides: understood
PS Advisor: No problem. Bye.
Pheidippides: bye
This seems to be completely at odds with the process described very simply in AJ Bell's platform. I don't intend to take anything as income until TY 20/21 and that will be intending to maximize the tax-free and lower-rate tax bands to their fullest.
Some residual questions:
How is the LTA reassessed?
Having taken all the TFLS in one lump does future investment growth matter, or not 'til I'm 75?
If you are close to the LTA does maximizing your drawdown to the limit of the Higher Rate Tax make sense as you can then put any excess into an ISA to protect against ANY future tax?
Regards
Pheid