Enhanced Protection, Protected Tax Free Cash & LSA
Sam_T
Member
Hi - I have posted this on the M&G Tech Matters chat too, so apologies if you are reading this twice.
We have client aged 76, who has recently transferred uncrystallised funds to a new SIPP provider. We are now trying to get them to pay out tax free cash.
Client has Enhanced Protection with 25% Protected Tax Free Cash. He crystallised funds in 2014, but has not taken any tax free cash since then. My understanding is as follows:
- TTFAC does not apply
- His LSA will be 25% of the value of the funds being crystallised, as at 5 April 2023
- As he is over 75 the LSDBA is irrelevant
Problem: the SIPP provider will not pay out his tax free cash until they have April 2024 values (we have given them the April 2023 values) - I can't understand why? They tell me they need to check what LSDBA the client will have left, but I don't see this is relevant as the client is now over 75.
The client is getting super frustrated and really needs his money.
Am I missing something?
Thanks
Sam
Comments
Hi,
Because LSDBA is the value of rights in April 2024, and they'll need to evidence that the member has enough LSDBA remaining to cover the payment of the tax free lump sum. Only the death benefit bit of LSDBA falls off at age 75.
That would be my best guess at why.
I have answered on Tech Matters too!
I assume the certificate says 25%.
It's the lower of 25% of your fund and 25% of the amount payable at April 2023 minus what youve had since then.
Under the EP PCLS modifications LSDBA is excluded from the permitted max calc so I'm not sure why they are asking for the April 2024 values.
The guidance has it clearly and the legislative references are there if you want to get hardcore.
https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm176320
@les_cameron does that mean you don't need LSDBA to pay tax-free cash with an EP certificate?
That's my understanding yes but only where you have actual EP tax free cash protection i.e. the certificate has a percentage on it.