Scheme Specific Tax-Free Cash Query with new LTA regimes
Wildparaplanner
Member
Hi,
We have a client with an EPP with scheme specific lump sum protection. We've got the A day values and the calculations done. Pot is now worth around £845,000 of which c£530,000 can be taken as a tax-free lump sum. No protections and hasn't taken any other pensions but is retiring soon.
What we can't get our heads around is whether she'll be able to take the full £530,000 "tax free" from April 6th 2024 next year when the new LSA and LSDBA system comes into play? From a tax point of view, are they better/worse taking it now or next tax year, or no difference?
Thanks
Comments
Having just sat through the fabulous (in case Les is reading!) M&G presentation, I don't think there will be a difference. If they had protection of some sort then under the proposed rules, they'd be better off waiting until next year as they would get more cash. Otherwise, no difference.
Tom understood!
The only reason they would get more PCLS is due to fund growth between now and taking it. If the FV stays the same the PCLS is the same.
I understand the quirks between a client with some form of "fixed/individual/primary/enhanced" protection and a client with no protection.
My query is in relation to the tax-free cash element specifically.
They will have a LSA of £268,275 from April 2024 - however, the scheme specific PCLS is £530,000 which is above this. Does this mean they're essentially capped at £268,275 tax-free from April 2024? Or does it bypass the LSA entirely as it's scheme specific protection?
The permitted maximum next year is usually the lower of 25% of fund, lump sum allowance and lump sum and death benefit allowance.
But when you have SSPTFC it appears from the draft regs the maximum is basically the calculated amount with no reference to anything else. So they should be able to get £530,000. That £530,000 would wipe out the lump sum allowance for any other schemes coming afterwards though as it stands.