Bridging Pension & LTA
julesstewart1983
Member
Hi,
We have a client with a lifetime allowance issue who has been offered a bridging pension with their scheme pension and I was hoping for some clarification that I am on the right tracks:
- Obviously taking the bridging pension utilises a higher proportion of their LTA- scheme pays for the LTA charge can only be used on the non GMP portion, correct?
- If he does not take the bridging pension and the GMP becomes payable at 65 then this would be further tested against the LTA under BCE 3 for increases to pension in payment, correct? Again scheme pays could not be used as it is GMP
Is there anything else I am missing? This is part of a broader income strategy with client having money purchase funds too and other factors eg IHT planning etc all being discussed.
Thanks
Comments
In case anyone is interested, the conclusion after discussing with tech advice is that the GMP would not be tested again at 65 as it is not being offered to a group of Scheme members eg increase in payment of 10% across the board, rather it’s member specific and at a specific date for him.
Whether the GMP could be commuted to pay an LTA charge is debatable, lots of discussion around this apparently where legal advice would be required.
It’s a moot point anyway as he has decided to take his money purchase later which will take the LTA hit rather than the scheme now.
Hi,
Thanks for posting the outcome. I don't know about the scheme pays option where the new benefit is GMP. But, on the BCE3, I'm sure an increase because of a GMP step up would be assessed against LTA at age 65.
That’s what I thought too but our compliance tech support said no about BCE3 and GMP step up, it’s referenced in the HMRC specifically as an exception.
Taken from https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm088630
But any pension increase which is in some way personalised for the individual, for example it occurs on a birthday of the member, is unlikely to meet the conditions in the second paragraph of this page unless similar increases are also being applied and at the same time for a sufficient number of people. It is therefore likely to be the case that an increase to a pension resulting from a revaluation of contracting-out rights, such as a ‘step-up’ for GMP, based on the particular circumstances of a single member, will not meet the conditions.
Does this not state otherwise?
https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm088630#IDAQR5IB
But any pension increase which is in some way personalised for the individual, for example it occurs on a birthday of the member, is unlikely to meet the conditions in the second paragraph of this page unless similar increases are also being applied and at the same time for a sufficient number of people. It is therefore likely to be the case that an increase to a pension resulting from a revaluation of contracting-out rights, such as a ‘step-up’ for GMP, based on the particular circumstances of a single member, will not meet the conditions.
Snap @benjaminfabi