Overseas Transfer Allowance

PippaO

Hello,

I have a query regarding the Overseas Transfer Allowance.

I understand the OTA is linked to the LSDBA, so £1,073,100 based on the standard amount.
I’ve also read that, where benefits were crystallised pre-April 2024, the OTA is reduced by 100% of the LTA used.
But, HMRC newsletter 158 said that the government would bring forward legislation to provide that funds designated to drawdown prior to 6th April 2024, i.e. have been LTA tested, would not be double counted against the OTA. Does anyone know if there has been any update since?

A client residing in Switzerland is preparing to transfer her UK pension rights (c£757k) to a Swiss QROPS.
She used 99.25% of her LTA when she crystallised benefits (designated to drawdown) in 2017.

On this basis, under current rules, would her remaining OTA be 0.75% / £8,048? With an OTC of 25% on the excess transfer value?

Any guidance would be much appreciated.

les_cameron

The OTA starting level is reduced by the amount of LTA used, so with no protections and 99.25% of the LTA left the OTA will be 0.75% = £8,048.25.

This seems a bit unfair as someone taking benefits for the first time in the new regime will have £1,073,100 LSDBA and OTA.

There was some double counting going on too that was addressed in the November 2024 legislation updates, and where the client designated money into drawdown should not be double counted against the OTA (as you could have used 100% of the LTA designating to DD and would not even be able to transfer that DD out with no OTC applying.

But we are still awaiting on HMRC to clarify if the amount that we can use is the monetary amount designated to DD or the LTA percentage. Hopefully we'll get that one answered soon.

:-)