LTA and DB

Nathan

Hi All
If a client has a DB scheme which is in deferrment, would any increase in deferral count as an actual and therefore void fixed protection?

Also, can you reduce the amount of LTA used by taking tax-free cash and income rather than 100% income. E.g. Full income = £47k a year = £940,000 LTA whereas reduced income is £37,000 with TFC of £184,000 = £924,000.


Thanks
Nathan

Nathan

Correction - *count as an accrual* bloody auto correct

richallum

If the revaluation is not more than CPI since 06.04.11 it won't be accrual.  If it is more (and scheme rules prior to 2010 don't allow for it) it'll be a pension input amount and my understanding is that it would breach FP.

Nathan

Thanks Richard

Caro

You can reduce the amount of LTA used by commuting the pension for tax free cash, as it is the post commutation figures that are tested against the LTA not the full pension amount.

This is an option to reduce the LTA, particularly if the client wants a higher lump sum, but often the commutation factors used can be quite poor. There is a LTA saving but in the longer term the client may be worse off than taking a LTA hit - as with all things it depends on the situation I suppose!

benjaminfabi

Also, if the date of leaving is pre aday it won't have a pension input period and therefore, essentially, cannot have a pension input amount.

All you could ever want to know and more can be found here.

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm053910

Nathan

Thanks Caro and Benjamin