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Thread: Mitigating impact of LTA

  1. #1

    Mitigating impact of LTA

    So I have 1,200,000 in my DC pension pot and no protection. I am a high rate tax payer, still employed, no plans to retire , but just about to turn 55 so some options are now available to mitigate the LTA which I have breached

    So I am thinking that to minimise the tax take - I should do this :

    Crystalise the whole amount, taking 250,000 tax free, 900,000 into drawdown , and pay 50,000 tax

    Then for the cash amount

    1 drip feed into my and my wife's ISAs. (Over next 3 years going forward 3 x 40k = 120k)

    2 make maximum contributions to wife's pension (she is a basic rate payer) last three years allowance is 3 x 40k = 120k, generating a 24k tax rebate

    Then for the drawdown amount .. ‎over the next years take income as and when with objective that if/when I come to crystalise again . ie age 75 or purchasing annuity , pot remains 900,000 so no further LTA liability

    Anything wrong with this plan? What am I missing ? Comments welcome. Anything that would work better?

    Specifically any advantage in crystallising 1m and leaving 250 uncrystalised , which I think is possible.

  2. #2
    The other option which is worth consideration is only crystallize a proportion of the LTA each year, e.g. Yr 1 20%, Yr 2 20% etc. This allows you to gain of any future increases of the LTA. The risk is obviously the government changes the rules!

    Good Luck.

  3. #3
    Worth checking but I thought that each and every w/d would use up a further % of your LTA, this would then be taken into account on the calculation for the final time at age 75.

    I have a very similar problem, my plan was to move into drawdown at 55, reducing the drawdown fund to 0 by age 75 so there isn't a further tax liability when the final check is completed at age 75.

    The down side seems to be the amount of income tax payable on the w/ds and IHT if the fund ends up in my estate and is not spend during my lifetime.

    I would also welcome any suggestions if anyone has any.

  4. #4
    To avoid a second LTA event
    You don't need to reduce the drawdown to zero by 75 .. you just have to withdraw all the growth , so that the fund is the same size as it was when you started it

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