Pensions and being LTA savvy...
Discussion
Regular member but a new account as hoping for some pension wisdom.
Suspect I need to go see a financial advisor to figure this out.
Me:
46
£660K pot
£36K/year contribution
Pay tax at additional rate i.e. 45%
Wife:
50
£250K pot
£10K/year contribution
Pay tax at basic rate i.e. 20%
Obviously, first-world problems, but if I continue to contribute at the current rate, I will likely breach the LTA.
Wondering if we should
- Reduce my contributions and increase my wife's accordingly but then lose out on the higher rate tax relief on my contributions
- Start looking at alternate options to a pension but miss out on all the tax relief
- Suck it up, recognise I'm in a good place compared to many and grateful for my luck
Wisdom gratefully received!
Suspect I need to go see a financial advisor to figure this out.
Me:
46
£660K pot
£36K/year contribution
Pay tax at additional rate i.e. 45%
Wife:
50
£250K pot
£10K/year contribution
Pay tax at basic rate i.e. 20%
Obviously, first-world problems, but if I continue to contribute at the current rate, I will likely breach the LTA.
Wondering if we should
- Reduce my contributions and increase my wife's accordingly but then lose out on the higher rate tax relief on my contributions
- Start looking at alternate options to a pension but miss out on all the tax relief
- Suck it up, recognise I'm in a good place compared to many and grateful for my luck
Wisdom gratefully received!
You can crystallise it all at 55 - so not too many years to worry about - I'd be tempted by another couple of years of contributions.
Your wife has enough to utilise her tax free allowance every year (assuming state pension as well). SO you can both do that & what you take out will be at 20% in either pot, so it's really just the extra relief on the way in.
Ultimately it depends on where you think LTA is going (likely flat or down) and what fund performance you're expecting in the next 9 years.
Your wife has enough to utilise her tax free allowance every year (assuming state pension as well). SO you can both do that & what you take out will be at 20% in either pot, so it's really just the extra relief on the way in.
Ultimately it depends on where you think LTA is going (likely flat or down) and what fund performance you're expecting in the next 9 years.
Similar position, LTA bust but wife has v little in her pot.
Was told not to add more unless there is a benefit (death in service, etc), and add into wife’s pot and get her to claim relief.
My simple belief is that I will be taxed at a higher rate further down the line, whereas wife can claim some back now despite her being in a lower tax band.
Either way in to hear what others have to say… (and then pretend I know more when talking to IFA)
Was told not to add more unless there is a benefit (death in service, etc), and add into wife’s pot and get her to claim relief.
My simple belief is that I will be taxed at a higher rate further down the line, whereas wife can claim some back now despite her being in a lower tax band.
Either way in to hear what others have to say… (and then pretend I know more when talking to IFA)
Carbon Sasquatch said:
You can crystallise it all at 55 - so not too many years to worry about - I'd be tempted by another couple of years of contributions.
Your wife has enough to utilise her tax free allowance every year (assuming state pension as well). SO you can both do that & what you take out will be at 20% in either pot, so it's really just the extra relief on the way in.
Ultimately it depends on where you think LTA is going (likely flat or down) and what fund performance you're expecting in the next 9 years.
Yeah, ideally will retire at 55 but hard to know. Keen to squirrel away as much as I can in the meantime. Still feels sensible to squirrel away, just not sure what the best way to do it is. Assuming LTA might go down so more risk and hoping that funds keep flying but that seems less likelyYour wife has enough to utilise her tax free allowance every year (assuming state pension as well). SO you can both do that & what you take out will be at 20% in either pot, so it's really just the extra relief on the way in.
Ultimately it depends on where you think LTA is going (likely flat or down) and what fund performance you're expecting in the next 9 years.
Meeten-5dulx said:
Either way in to hear what others have to say… (and then pretend I know more when talking to IFA)
Indeed 
46 today?
Can you access your pot at 55? I ask as i am about 12 months younger than you and i am defo 57 or 58.
Obvious answer but is there a means to have contributions redirected. A previous employer would fill an ISA if you could shoe a pension pot had hit LTA. Obviously with the tax implications of it being post tax salary but the benefit is they kept giving you something
Can you access your pot at 55? I ask as i am about 12 months younger than you and i am defo 57 or 58.
Obvious answer but is there a means to have contributions redirected. A previous employer would fill an ISA if you could shoe a pension pot had hit LTA. Obviously with the tax implications of it being post tax salary but the benefit is they kept giving you something
Meeten-5dulx said:
Similar position, LTA bust but wife has v little in her pot.
Was told not to add more unless there is a benefit (death in service, etc), and add into wife’s pot and get her to claim relief.
My simple belief is that I will be taxed at a higher rate further down the line, whereas wife can claim some back now despite her being in a lower tax band.
Either way in to hear what others have to say… (and then pretend I know more when talking to IFA)
We were similar. Was told not to add more unless there is a benefit (death in service, etc), and add into wife’s pot and get her to claim relief.
My simple belief is that I will be taxed at a higher rate further down the line, whereas wife can claim some back now despite her being in a lower tax band.
Either way in to hear what others have to say… (and then pretend I know more when talking to IFA)
Mine complicated by a couple of 'small' DB schemes due to pay aged 60 and 65.
I chose to take TFLS for the majority of the DC scheme - ensuring that there was enough %LTA left for the future DB schemes.
The actions have been proven to be right: if I'd left it alone, I'd be *way* above the LTA. The monies taken out were mostly invested to S&S ISAs, some finished the mortgage (which arguably was a poor decision, but it felt good & wasn't a huge amount).
If you get company contributions, then certainly pay in to at least match that - the company contribution will more than offset any future LTA tax costs.
10 or 11 years (57 being your 'pension freedom day', I believe) could see changes to the LTA either way: no simple guaranteed answers, but getting 40% relief going in (& company contributions) certainly helps relieve any 'pain' of future taxes.
OP: have you modelled some spreadsheets with your contributions as they stand, perhaps making some assumptions for growth? My numbers 'hockey-sticked' in the past few years (markets doing well), so you *may* find yourself going well over......but since my crystal ball is cloudy, I can't confirm or deny that
Do you already max out ISA contributions?
I would certainly do that - it will give you a pot prior to 57 to enable you to chose to step away from work earlier than aged 57.
I see no reason to stop contributing whilst you are still so far away from the LTA.
Any number of things could change in the future which may make you glad you continued to contribute.
Markets could tank, higher rate tax relief could be removed, you could get a salary increase and be impacted by the tapered annual allowance, the LTA could be reduced and you could apply for protection.....
Plus, don't forget that pension pots are (currently at least) outside of your estate for inheritence tax purposes.
Any number of things could change in the future which may make you glad you continued to contribute.
Markets could tank, higher rate tax relief could be removed, you could get a salary increase and be impacted by the tapered annual allowance, the LTA could be reduced and you could apply for protection.....
Plus, don't forget that pension pots are (currently at least) outside of your estate for inheritence tax purposes.
craig1912 said:
Changing to 57 in 2028
There is draft legislation suggesting existing schemes with a pension age of 55 will be protected:https://assets.publishing.service.gov.uk/governmen...
“Protected pension age: scheme rights existing before 6 April 2023
23ZB(1) This paragraph applies in relation to a relevant registered pension scheme and a member of the pension scheme if—
(a) neither paragraph 22 nor 23 applies in relation to them, and
(b) the entitlement condition or the block transfer condition is met.
(2) A registered pension scheme is “relevant” if it is not a uniformed services pension scheme (as defined in section 279(4)).
(3) The entitlement condition is met if—
(a) on 5 April 2023 the member had an actual or prospective right under the pension scheme to any benefit from an age of less than 57,
(b) the rules of the pension scheme on 11 February 2021 included provision conferring such a right on some or all of the persons who were then members of the pension scheme, and
(c) such a right either was then conferred on the member or would have been had the member been a member of the scheme on that date.
(4) Theblocktransferconditionismetifthememberisamemberofthe pension scheme (“a transferee pension scheme”) as a result of—
(a) a block transfer to the transferee pension scheme from a pension scheme (“the original pension scheme”) in relation to which the entitlement condition is met, or
(b) a block transfer to the transferee pension scheme from a pension scheme that was a transferee pension scheme in relation to the original pension scheme by virtue of the previous application of paragraph (a) or the previous application (on one or more occasions) of this paragraph.
(5) Forthepurposesofsub-paragraph(4),atransferisablocktransferif it involves the transfer in a single transaction of all the sums and assets held for the purposes of, or representing accrued rights under, the arrangements under the pension scheme from which the transfer is made which relate to the member and at least one other member of that pension scheme.
(6) The member’s protected pension age is the higher of—
(a) 55, or
(b) the age from which the member had an actual or prospective right to any benefit under the pension scheme on 5 April 2023 (or, where the block transfer condition is met, under the original pension scheme on that date).
phfinance said:
Yeah, ideally will retire at 55 but hard to know.
You don't need to retire to crystallise your existing pension & take tax free portion if you desire (and it's allowable) - you can carry on working, just restrict future pension contributions.Good point above that it might not be 55 by the time you get there - I'd heard it was based on when you opened the SIPP, but that might not be correct.
DeuceDeuce said:
There is draft legislation suggesting existing schemes with a pension age of 55 will be protected:
https://assets.publishing.service.gov.uk/governmen...
“Protected pension age: scheme rights existing before 6 April 2023
23ZB(1) This paragraph applies in relation to a relevant registered pension scheme and a member of the pension scheme if—
(a) neither paragraph 22 nor 23 applies in relation to them, and
(b) the entitlement condition or the block transfer condition is met.
(2) A registered pension scheme is “relevant” if it is not a uniformed services pension scheme (as defined in section 279(4)).
(3) The entitlement condition is met if—
(a) on 5 April 2023 the member had an actual or prospective right under the pension scheme to any benefit from an age of less than 57,
(b) the rules of the pension scheme on 11 February 2021 included provision conferring such a right on some or all of the persons who were then members of the pension scheme, and
(c) such a right either was then conferred on the member or would have been had the member been a member of the scheme on that date.
(4) Theblocktransferconditionismetifthememberisamemberofthe pension scheme (“a transferee pension scheme”) as a result of—
(a) a block transfer to the transferee pension scheme from a pension scheme (“the original pension scheme”) in relation to which the entitlement condition is met, or
(b) a block transfer to the transferee pension scheme from a pension scheme that was a transferee pension scheme in relation to the original pension scheme by virtue of the previous application of paragraph (a) or the previous application (on one or more occasions) of this paragraph.
(5) Forthepurposesofsub-paragraph(4),atransferisablocktransferif it involves the transfer in a single transaction of all the sums and assets held for the purposes of, or representing accrued rights under, the arrangements under the pension scheme from which the transfer is made which relate to the member and at least one other member of that pension scheme.
(6) The member’s protected pension age is the higher of—
(a) 55, or
(b) the age from which the member had an actual or prospective right to any benefit under the pension scheme on 5 April 2023 (or, where the block transfer condition is met, under the original pension scheme on that date).
hoping this to go through as turn 55 in 2028 typically!https://assets.publishing.service.gov.uk/governmen...
“Protected pension age: scheme rights existing before 6 April 2023
23ZB(1) This paragraph applies in relation to a relevant registered pension scheme and a member of the pension scheme if—
(a) neither paragraph 22 nor 23 applies in relation to them, and
(b) the entitlement condition or the block transfer condition is met.
(2) A registered pension scheme is “relevant” if it is not a uniformed services pension scheme (as defined in section 279(4)).
(3) The entitlement condition is met if—
(a) on 5 April 2023 the member had an actual or prospective right under the pension scheme to any benefit from an age of less than 57,
(b) the rules of the pension scheme on 11 February 2021 included provision conferring such a right on some or all of the persons who were then members of the pension scheme, and
(c) such a right either was then conferred on the member or would have been had the member been a member of the scheme on that date.
(4) Theblocktransferconditionismetifthememberisamemberofthe pension scheme (“a transferee pension scheme”) as a result of—
(a) a block transfer to the transferee pension scheme from a pension scheme (“the original pension scheme”) in relation to which the entitlement condition is met, or
(b) a block transfer to the transferee pension scheme from a pension scheme that was a transferee pension scheme in relation to the original pension scheme by virtue of the previous application of paragraph (a) or the previous application (on one or more occasions) of this paragraph.
(5) Forthepurposesofsub-paragraph(4),atransferisablocktransferif it involves the transfer in a single transaction of all the sums and assets held for the purposes of, or representing accrued rights under, the arrangements under the pension scheme from which the transfer is made which relate to the member and at least one other member of that pension scheme.
(6) The member’s protected pension age is the higher of—
(a) 55, or
(b) the age from which the member had an actual or prospective right to any benefit under the pension scheme on 5 April 2023 (or, where the block transfer condition is met, under the original pension scheme on that date).
REM2112 said:
I have only just started thinking about this (55 and unexpectedly out of work). Whatever I take as TFLS, won't the other 75% be taxed at my marginal income tax rate, so crystallising the lot wouldn't make much sense, unless I needed the cash?
You can crystallise and leave it in your SIPP untaxed.Gassing Station | Finance | Top of Page | What's New | My Stuff