Pre A Day Benefits
LisaC
Member
Hi. A client has a military pension which started 11/08/2005 at which point he received £53,174.67 terminal grant (TFC) and pension £17,725. From April 24 the pension will be £30,982 pa. He has not taken any pension benefits since but is now considering crystallising his small SIPP, £135,000.
What LSA and LSDBA will he have from 6/4/24? Would it be worth applying for transitional certificate or taking small PCSL before 5/4/24?
Thanks
Comments
£30,982.00
25
£774,550.00
£193,637.50
The pension will use up this amount of LSA. Leaving plenty of standard LSA to be able to pay 25% of the SIPP.
If they took a small BCE before April the pension would get tested under the LTA regime - and would use up broadly the same amount of LSA. Now in guidance HMRC said you could get a TTFAC showing the actual TFC paid as a deduction (£53,174), which would make a big difference to the available LSA and LSDBA (the law actually contradicts the guidance - the law says it uses the £193,637 calculation even for the TTFAC.
https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm174300#precommencement
Unless you are expecting the SIPP to grow to a point where £268,275 - £193,637 LSA or £1,073,100 - £193,637 is not enough LSDBA then I don't think you need to be overly bothered about anything.
As this an increasing income they should have an event before the income goes up again to get it tested using minimal allowances. This person should have had a BCE years ago and woudl be in a better position.
Thank you Les.