Transitional Tax Free Amount enquiry for specific client case
Nath
Member
Morning All
We have a client that used up 100% of his £1.25M protected LTA prior to April 2024 by taking full income option from his DB scheme and no lump sum.
He also has a £500K uncrystallised SIPP elsewhere that hasn't been touched. Under the standard calcs he obviously would have 0% left, but looking at the calculators and calculations, if he applies for the transitional certificate, he will then have £312,500 LSA available again.
Two questions on this (hopefully Les sees this 
):
- Is the understanding above correct?
- If that is the case, can the client take the full £312,500 tax free from the £500,000 SIPP if he provides them with the certificate?
The second question i'm really not sure on. The LSA would obviously be the 'max' they could take but I believe it is still limited to 25% of the value of the SIPP?
Hopefully someone can clarify the points.
Thank you
Nathan
Comments
My understanding is this is correct, and they would also have £1,250,000 LSDBA available also. However my word has less weight than others on here!
Thanks for the reply.
So do you also think he could take £312,500 from the £500,000 SIPP or that he would be limited to 25% of this? Hopefully we will also get a few more replies to really nail this down and thanks for answering.
N
Sorry, for some reason my mind completely phased over this part!
No it would just be 25% of the amount crystallised (i.e. £125,000 if they crystallise in full) - which is still better than £0!
Yes this makes sense thank you.
What @Wildparaplanner said!
Standard PCLS is lowest of of 25% of fund, LSA and LSDBA.
Perfect thank you all!!
Hello, sorry to jump on an existing thread, but I have a client in a similar situation, but a technical team is telling us something different to the above.
The client used 117% of LTA when took benefits from NHS pension. This paid £170,424 as a lump sum (was reduced by about £3k due to an annual allowance tax charge, but will ignore that for now..).
He also has an uncrystallised DC pension value of about £80k, and considering further contributions (of which availability of tax free cash will play a part in the decision)
So under standard calculation would not be any LSA remaining, but looking at this simply then if applied for transitional certificate then could be up to £97,851 tax free cash available, meaning that 25% tax free cash could be taken from the DC scheme.
However, I am being told that as 100% of LTA was used, then no tax free cash (LSA) advantage to transitional certificate, but would help the LSDBA. An issue of this nature does ring a bell in the reading I have done (ie needing to have at least 0.01% of LTA available), but I am struggling to find confirmation for certain. Any help would be greatly appreciated.
Better not be one of my technical team!!!
You are correct they are wrong.
What they have said is only correct where the tax free amounts paid was £268,75 or more.
In the very early days there was a thought that you would only be able to get a certificate if you had used less than 100% of LTA. Maybe that is what rang a bell.
That got changed fairly rapidly though - it was the 99.99% / 100% problem. Not fair.
Thank you Les for such a swift and helpful comment. Don't worry, was not one of your team!