Pensions  

Navigating the lifetime allowance test at age 75 

  • Describe how the LTA test applies at age 75
  • Explain some of the consequences of the LTA test
  • Identify ways to mitigate the LTA test
CPD
Approx.30min

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This flexibility can be useful, particularly if a client holds both DB and DC schemes – the DC scheme can be selected to pay the charge and therefore not reduce the potentially more valuable DB benefits.   

The allowance had been increasing in line with CPI from 2018-19, with increases to £1,030,000 for 2018-19, £1,055,000 for 2019-20, and then £1,073,100 for 2020-21.  

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The chancellor announced in March 2021 that the allowance would remain at £1,073,100 until April 2026. This freeze will likely see more exceed their LTA and is unfortunate timing for those approaching age 75 in the next few years.

Joshua Croft is a technical consultant at AJ Bell

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. Which of the following is NOT something that happens with one's pension fund at 75?

  2. It is the value of uncrystallised funds at age 75 that is tested against the LTA , true or false?

  3. How is the LTA tax charge applied?

  4. It is still possible to be entitled to PCLS after the age of 75, true or false?

  5. How could clients with funds in drawdown pre-75 mitigate an LTA charge?

  6. For a member with multiple schemes at age 75 they can effectively choose which scheme pays any LTA charge resulting from the age 75 test, true or false?

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  • Describe how the LTA test applies at age 75
  • Explain some of the consequences of the LTA test
  • Identify ways to mitigate the LTA test

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