The Lemon Fool

For avoidance of doubt, I am a complete novice in understanding pensions. I intend to get professional guidance, but am trying to gain a basic understanding so that I can better understand and validate what the professional tells me. A lot of what I see on this forum is well over my head.

I hope to retire at the age of 60 - less than three years away.
I currently am in the 40% pay bracket, but intend to reduce my hours within the next 6 months, which will bring me under the threshold for 40%.
My work pension scheme is in it's third iteration - DB Final Salary, DB CARE, and now Master trust.

I would like to make increased payments into the Master Trust, at least for the next 6 months, with the intention of lifting it tax-free when it comes to retirement (is this a reasonable idea? I currently don't plan to utilise my full tax-free chunk when the time comes).

The fly in the ointment is the LTA, which is mentioned in my work form for applying to increase payments. I have no idea if I am anywhere near the limit.

The transfer value of my pensions at the moment are in the ballpark of the LTA, which is why I am concerned.
However I have also seen mentioned "20 times the expected annual pension" mentioned, which leaves plenty of headroom.

So the simple question is, how to I find out how much of the allowance I have used?


TIA
Elkay

elkay wrote:So the simple question is, how to I find out how much of the allowance I have used?

I think your pension providers are expected to be able to tell you.

For schemes with a defined benefit, those where your retirement income is related to your salary and years of service, the allowance is twenty times the annual pension income amount. It's where the benefits are determined by the contributions and their growth that it's the fund value. You or your provider would have to add them together to get your actual position.


If you are getting some form of annual statement, the lifetime allowance amount may be in the small print somewhere.

elkay wrote:
So the simple question is, how to I find out how much of the allowance I have used?


TIA
Elkay

I take it the Master Trust is DC.

In which case, for each of the DB pensions, ( 20 * annual pension on offer at the point you retire ) + any lump sum at the same point in time. If a lump sum involves a reduction in the annual pension, use that lower number when multiplying by 20.

For the DC pension, it is simply the cash value of the fund. You know that value now, but will have to project forward to see how much headroom you have for further DC contributions.

Thanks genou & Alaric, your responses make perfect sense.

The actual LTA wasn't in my pension statement, but I can calculate it from the information there based on the guidance you have provided. Based on those calculations I have ample headroom for the amount I'm planning to contribute.

The more I read this forum and think deeper, the more questions I come up with. Maybe the questions I will ask and the answers received could contribute to a beginners guide to workplace pensions...