Thanks for the video Pete. This stuff is more complicated than it a should be. Once the Govt decided to push auto-enrolment and people taking control of their own pension (a good thing of course) then at the same time they really should have provided better support on how to do this - teaching about investing in schools for example. We shouldn’t have to rely on people on TH-cam taking the time to explain it to us. For example, moneyhelper’s own website is awful when it comes to calculating your pension income. It assumes a 4% annuity, not linked to inflation, it assumes all tax free cash is taken up front, there’s no way to incorporate ISAs into the calculation etc… etc… It is actually misleading. The Govt needs to do better. If they really want us to take control of our own future, which they clearly do and is actually a great idea, then please help the general population do this. Don’t assume we know what we’re doing because we really don’t
I regularly see comments in a similar vein - it's too complicated, we shouldn't need to engage with a financial advisor/planner to take our pensions. The Moneyhelper website is aimed at less well informed individuals, the majority of whom will just take an annuity because it's easy to understand and the income is guaranteed for life. If you are watching this (and similar channels) then you are already in the minority of far better-informed individuals and, I'm afraid, although an annuity might not be the optimal financial approach for other people, it is far simpler and relatively stress-free, which is a critical factor that must be considered. Also, while you are young and numerate, you are well equipped to manage investments and make these very important financial decisions but as you age and move into retirement, you may be less confident in your ability to continue managing your pension in 5,10 or 20 years time.
Forgive me but I think that your assumption that a government wants citizens to have power ("take control of our own future") is incorrect. They may want to have as little responsibility as possible but that does not mean they will help individual citizens to have any control.
I am revising for my FA2 CII exam which I have in two days time and want to say a big thank you for all your excellent and informative videos. They have helped me massively when its come to digesting the info after I read the book - which can be rather dry! But your videos have helped me retain the info so a huge thank you! Great stuff, Pete
@@MeaningfulMoneyAs a CFA, I'm sure that you would soon be bored at the shallow end, although it must sometimes feel like "just give me a break from the constant changes" I know my wife felt like that in education.
I took no PCLS when I took my DB pension in 2020 using approx 85% of the LTA. I’ve just received my TTFA Certificate to use when I draw on my SIPP (RBCEs) going forward. The tax free cash I can take is now capped by my SIPP value and not by the Tax Free Allowance.
That’s right. Only way to get the full LSA now would be to grow your SIPP to £1.0731m. But at least you get more than you would under the standard calculation, assuming your SIPP is greater than £161,000 approx
Well done on getting your TTFAC so quickly. I’m still waiting, and very envious! (I’m champing at the bit to crystallize my remaining SIPP before Rachel Reeves changes the rules again!)
Excellent - big thanks. How or where do you apply for a TTFAC? And if you apply for one then do you have to use the Alternative Calculation - or can you still opt to use the Standard calc?
In my case, with Fidelity, they have a good system. I’m very confident that I need the TTFAC, but the fact is that, once issued, it has to stand. You can’t revert to the standard calculation if that’s better for you. However, Fidelity carry out the standard calculation and only issue the TTFAC if it’s more advantageous. If the standard calculation wins, they won’t process your TTFAC application.
@@MeaningfulMoneyis that the past pension providers where you took benefits or the current provider. Eg i took db and avc benefits Inc tfc and still have an in touched SIPP.
this will add a layer of finesse to withdrawal strategies - eg if you’re close to hitting LSA there is no particular reason not to withdraw all tax free cash and let only the crystallised amounts grow as you’ll be taxed anyway, so shaping your income will need some sanity checks
Thaks Pete. Yet more complexity for many though fortunately I haven't started taking my pension. Just hoping the next government don't mess with the tax free allowance or put a LTA back, especially given the fiscal drag of frozen income tax allowances pulling many retirees into the 40% bracket. Really looking forward to your LTA video!
Hi, great video as always . I have lump sum question but not sure if there is an answer or it really doesn’t matters. I have a SIPP , DD Pension & APECs . Which one do I draw my lump sum from - my current thought is my DB scheme - reasoning my wife’s pension is much smaller, so this is a way of transferring money to her ( she will get 1/2 full pension either way ) I will then have a reduced guarantee income which will give me more flexibility around tax planning.The disadvantage I see is that it moves more money in to less guaranteed income . I would welcome any advice . Ru
I obtained TTCF certificates from my final salary pensions showing that I have not taken any cash free lump sums. I provided these to my other pension provider from whom I have not yet taken any money. However, they state that I am only entitled to 25% of the funds held by them. Please can you advise whether this is correct?
Great video - I'd tried reading the new sections of the Pensions Tax Manual ("zzzzzzz") - this was far easier - thank you. Having taken a DB pension in 2021 but only a small tax-free amount from an associated AVC, still contributing to a DC scheme and with a couple of untouched SIPPs that put me right up to the old LTA, I figured there was benefit in applying for a TTFAC. So I duly contacted my DB provider (who paid the lump sum and is still paying me each month) Their initial response was "as you took your benefits before 6 April 2024, you are not able to be supplied with a Transitional tax-free amount certificate". I queried this and asked for an explanation but all I got back was "as you took benefits prior to 6 April 2024, the new legislation does not apply". That doesn't seem to align with your video - have I misunderstood something here ?
Every day is a learning day! I have two questions, which I hope someone can answer: I am recently retired and living mainly on income from a SIPP until state pension age. My most recent crystalisation event was in March 2024. I have initiated a couple of small legacy DB pensions from which I received the 25% tax-free PCLS I do not envisage exceeding the lifetime allowance, or the current tax-free PCLS limits but I do want to be cautious and take appropriate precautions, if necessary. Q1. I shall need to make another crystallisation event later this year. Should I request a TTFAC before doing so? Or, if there has been no previous crystallisation event where less than 25% PCLS was received, is the TTFAC then rendered redundant (because the calculation would be the same in each case)? Q2. I also have a small GAR pension, which I plan to commence, probably early in the next (2025-26) tax year. I do not intend to take the tax-free PCLS from this pension, in order to maintain the maximum annuity income. Does that have any impact on the actions that I should take? Q3. I assume that the previous lifetime allowance test at age 75 is now redundant since the lifetime allowance was abolished? Q4. Is the proportion of the previous Lifetime Allowance used for each crystallisation event still recorded for potential future use (meaning that making a large crystallisation event now is not beneficial)? I am hoping that the questions are sufficiently generic that they can be answered without constituting personal financial advice. I am looking forward to the next video about what could happen if we have a future Labour government (and perhaps a lifetime allowance is reinstated).
Having watched this video several times over several days I now feel I have a grip on the situation 😥. I have always kept financial matters simple (concentrated on paying off the mortgage double quickly and one pension pot) and as I have only taken a small sum (£80k) from my drawdown pension so far, the calculation is simple (standard calculation). Having done the maths I remain in exactly the same position as I was previously. So I have spend a few days needlessly concerned that I needed to get to grips with this. The 'standard rule' therefore applies. Deal with things now as delay only leads to stress.
Wow! Not sure I fully understood all of that but it’s certainly reinforced my desire to use the services of a financial planner before taking any pension provision
Quick general question for anyone without a complicated answer please about the first 25% tax free from a private pension Is it per pension or only once Ie if you have 3 pensions can you take 25% tax free from each one Or is it after you take it from one that is it.
If you take tax-free cash in excess of your allowance and then taxed on that excess at your marginal rate of tax, will the tax be reduced by any unused personal allowance?
Great video - what is the optimal age group for buying the retirement planning course, considering optimal utilisation of the one free year of the voyant plan - thank you !!
Thanks Pete for this information, I did wonder how the change to the LTA rules would apply to my circumstances. When I left the military I was entitled to a pension. This was valued at approximately 30% of my LTA. My second career allowed me to build up a considerable amount in my SIPP which was in excess of my LTA. I have now retired and triggered a BCE on most of my SIPPs (I have 3). Because roughly 30% was already used by my military pension,even though there was no tax free element to the pension, my £268,000 tax free cash was also reduced by about 30%. Does this mean if I could get a certificate stating I had zero tax free payment from my military pension I could apply to my SIPP providers to pay the balance of my tax free lump sum? Excuse the lack of acronyms.
In short, yes!if you haven’t fully crystallised your SIPP and if you can prove the tax free cash you have had from your SIPP, then you could well be able to claim more cash from it by virtue of you not having taken the cash from your armed forces pension.
Thanks Pete, really helpful. On the TTFAC issue, what’s the situation if someone took PCLS before 6 April 2024 somewhere between 0% and 25%? How is that deducted from the £268,275? Many thanks
Hi Pete, Found your videos recently and been watching a fair few over the last 24 hours (minus sleep time of course), as someone who is going to be 58 in the near future without much in the way of a future plan, what would you recommend are the first steps on getting on the road. I’ve applied to the facebook group this morning too (I seem to have a bee in my bonnet lately over getting s**t done).
Or….help? We don’t all fleece our clients. In fact most of us don’t. I’ve built a career on helping people avoid the need to lay for professional advice, yet I’ve never been busier.
Gosh, I’m a Retirement Planning graduate and my head still exploded about halfway through! I ought to apply for a Transitional…err…Thing…err Wotsit, it seems as it’s far from impossible I could one day reach the TFLS limit. (I annuitised a pension and took nowhere near 25% TFLS) Am I right??
So its now based on tax free cash taken, not total policy value ? In theory if I had vested a pension valued at twice the LTA figure just prior to april 2024 (lucky me), I would have been forced to pay tax on the excess ( ie half the policy fund value) no matter if i took annuity or tax free cash or a mix. But with the new rules, if I had waited until after april 2024, I would only have had to pay tax on tax free cash I took in excess of the 268k figure ? If I had taken full annuity in either case, pre 2024 i'd have paid a load of tax, but post 2024 i'd have paid no tax (i'm ignoring income taxes on the annuity itself) ?
Great video! So as someone with a DB yet to commence, and a SIPP from which I have taken a couple of tranches of tax-free cash, am I right to think there's no chance of a beneficial TTFAC? Also, when I come to start the DB pension, the option of tax-free cash (vs commuting into into income) is more attractive than it might have been under LTA, because it'll use up lifetime tax-free allowance whether I take it or not?
Your first question - yes. TTAFCs only available based for benefits taken before 6th April 2024. Your second question. There’s an example on this page (scroll down quite a way to the section headed ‘Commuting pension for cash’): techzone.abrdn.com/public/pensions/Tech-guide-tax-free-cash
I am in a similar situation and I am trying to find out more information regarding the new pension rules and DB pension crystallisation at a future date (in my case 5yrs).
@@jocar-1735Thanks, that's really helpful, and yes, it clears up my misunderstanding about lump sums from DB pensions. I did some more reading and video-watching after asking my questions. There's a long AJ Bell video from several months ago (when the April 2024 bill was published) which specifically addresses the options for taking DB benefits.
The majority of younger people in the UK wouldn’t be impacted as their pension savings rates are far too low but its those very people who become confused and disillusioned by all this complexity such that they choose not to engage with their pension and not to make additional contributions to it, thus paying more tax over their working lives and having insufficient retirement savings. The earlier you save into your pension the better and in my view, given the forever changing regulations and HMRC tax rules, it’s best to contribute as much as you can to your pension, attract tax relief and any employer contributions, reap the benefits of compound growth and review things when you’re 50/55/60 but don’t worry about it. If you do have so much in your pension pot that you start to run the risk of hitting the TFC limit it’s a nice problem to have and as pensions fall outside of your estate for inheritance tax, your money is in a good place if you have beneficiaries.
@@MeaningfulMoney I’ve been working in DB & DC pensions for 35 years. I worked through Simplification 2006 but since then pensions have become more complicated each year. I enjoy your video’s and am always impressed by your detailed knowledge and presentation skills!
Pension rules appear to be continually tinkered with by all governments. I wonder how long the inheritance tax free status of pension funds will last for as it seems a little unfair that the generous tax benefits granted to an individual to build their own pension wealth can be transferred over to anyone else rather than to ones spouse.
@@jocar-1735 There are regulations around it which mean the residual pot could be taxable in some circumstances. Death before age 75 The Lump Sum and Death Benefit Allowance (LSDBA) is the limit on the total amount of tax-free lump sums that can be paid in respect of an individual before marginal rate taxation arises. This includes any tax-free lump sums used up under the LSA, any benefits paid to you as a serious ill-health lump sum before age 75 or any tax-free Lump Sum death benefits payable in the event of your death before age 75. The limit is £1,073,100 but may be higher if you have transitional protection or enhancements. Lump sums within the available LSDBA will normally be paid tax-free. Death from age 75 onwards If you are 75 or over when you die, a beneficiary of your pension pot will have to pay income tax on any withdrawals at their marginal rate (i.e. the highest rate of income tax that they pay).
A very timely video for me, Pete, given that I’ve just applied for a TTFAC. As I read the Finance Act 2024, only UFPLS and PCLS count as the previous tax free cash amounts when calculating the remaining LSA. However, I’ve also seen the HMRC advice that it’s intended to change the legislation to include pre-commencement lump sums. Has that happened yet or is it imminent?
How is this impacting people, retiring in 2043? The pension cap is increased from 40k to 60k, so that you get ducked at 57, when your 25% drifts waaay off 268,275.
this is a brilliant explanation but how on earth is the average person ever going to have a hope of understanding this?! The DWP and HMRC should be required to produce rules that can be understood by non-experts. And Labour have said they are going to change it all back anyway. John Steinbeck quote "I know now why confusion in government is not only tolerated but encouraged. I have learned. A confused people can make no clear demands."
Yes, it does beg that question. If you are saving 40% tax on your contributions but only pay 20% on withdrawal then it is an advantageous move. I also suppose if you are only saving 20% tax on your contributions and also only paying 20% on your withdrawals then you are getting the benefit of that 20%, which would have been taxed as income tax if you hadn't contributed, growing in a share fund until you withdraw it.
Growing tax-free, too. I don’t think the new rules on taking tax-free cash in retirement affect a pension’s merits or otherwise while saving. They are still the best option for most people
Hi Pete, i have retirement accounts in both the USA and UK (I know reside in the UK and I'm a uk citizen). Can i access tax free cash from the USA (401k) account? I think I read that I can but can find little advice on this topic
Ooof - not sure on that one. I don’t think your US pension affects the LSA, but I’m also not 100% sure you can take tax-free cash from a US pension in the UK. Needs a specialist!
If you become a tax resident in Cyprus, that will be how you’re taxed. You won’t be taxed twice as there is a double taxation agreement in place between Cyprus and the UK
Absolutely. Should be a flat rate tax on income. Shouldn’t matter it comes from work income, dividends, trust payments, inheritance etc. so no avoiding tax on massive inheritance like the Duke of Westminster or god knows what from footballers, musicians , CEOs etc. tired of getting stuffed for tax.
I actually agree with all of you. We need a MUCH simpler, fairer system, but there’s no political will to get it done because no pollies these days think further ahead than the next election
Still a bit confused here. I started taking an income from my DB pension in FY 23/24 with no tax free lump sum and was informed that this amounted to 33.9% of the old LTA. I have a couple of SIPPs amounting to c 720k from which I have not yet taken anything . Can I just take 25% of the SIPPs as tax free cash (probably as UFPLS withdrawals) or do I need to get a TTFAC first?
Definitely apply to your DB scheme for. TTFAC. And you’ll need to do that before you take anything from your SIPPs. Under the standard calculation, your max TFC from the SIPPs will be £177,329 or thereabouts. With a TTFAC it could be £180,000. Not a huge difference but worth it, I’d say
@@MeaningfulMoney Thanks. Just to confirm, I have to apply to the DB provider and not the institution that I have the SIPP with? (I spoke to the DB administrator and they said they'd never heard of these!)
Thanks Pete. So just to be clear if you have both a DB and DC pension but start drawing from your DB without taking a tax free lump sum, then this will leave you with the maximum tax free lump sum of £268,275 remaining. In this case could you take more than the 25% tax free allowance from your DC pension or would you also have to build your DC pension up to the value of £1,073,100 to fully utilise the maximum available tax free allowance.
You can’t take more than 25% of your DC value as tax-free cash, so it’s the latter example in your case. And you would need to apply for a TTFAC to get the max LSA.
Great video, explains alot, appreciate this is a complex area and potentially evolving... I'd like to know if DB PCLS reduces the TFC of a DC pension. E.g. if I have a DB pension that has £50k PCLS which is tax free, does this reduce a DC TFC allowance to £268 - £50 = £218k? If so then as a consequence the amount of pension required to meet full TFC would be 4 x £218k = £872k. Appreciate with no LTA (although may be reinstated) you can build higher but assuming most bang for buck, then do the two things have to be considered together or separately?
What would be the case if no DB pension PCLS was taken in order to maximise guaranteed pension income - would the new LSA be reduced if the DB pension was crystallised after 6 April 2024 without any tax free cash ?
@@jocar-1735 not an option in my case as its a public sector one and scheme rules are PCLS of 3 x yearly amount, only option is to take pension earlier rather than later which reduces PCLS a bit as a result.
So just wanting to make sure I have understood correctly... Re DB schemes crystalised after April 2024.... If I dont take any tax free cash (and opt for the higher pension) then I would have my full LSA remaining? Which I can then use for any tax free cash from SIPP?
@@MeaningfulMoney Oh! Glad I asked!! So AFTER April 2024 if I dont actually take any tax free cash from my DB Scheme then how much LSA will I be deemed to have used? i.e. 25% of what??
@@MeaningfulMoneyGrateful if you could explain further Pete as it is difficult to determine how the new tax free cash limit can be reduced by DB pension crystallisation after April 2024 when no tax free cash is taken at DB pension crystallisation.
two questions 1 - for DB schemes if I don’t opt to take the tax free lump sum, am I free to take the higher income and no impact to LSA? 2 - for a DC scheme if I use my entire pot for an annuity, does the tax free potential affect that or is it ignored?
1 - only if you crystallised your DB scheme before 6th April 2024 2 - ditto. Anything crystallised after 6th April 2024 will use the standard calculation.
My pension is complex, but I breathed out when they lifted the old LTA - purely as I was running the risk of hitting it in the coming years - and I had no idea what to do once I had passed it. Also, I am an average person, who has been saving since I was 16 back in 1986 - and my pension output would still only be reasonable to maintain my lifestyle etc etc.. but I have planned and paid for nigh on 40 years to get like this, although some of it I cannot take until I am 67 - so still along way to go.
Forgot to add, I live in fear of a future government meddling with the LTA again, as we need to encourage people to pay into pensions - not deter them.
It’s why people just get annuity or a single 60/40 default fund. Government need to regulate and force providers to offer better guidance, financial MOT every 10 years.
Why should any show evidence of the amount of tax free cash received or not received when the Taxman already knows any cash they have given or not given you in this country. 🤔🤔🤔
I understand what you say Pete but I wish you didn't use examples of people with massive figures in their pensions, it makes me feel bad and FFS to you too.
Big congrats to those geniuses at HM Treasury who have come up with our world beating pensions taxation regime that changes every year and that no one understands. I’m sure this is doing wonders to encourage people to save for old age.
![BABYMONSTER - 'DRIP' M/V REACTION [WAS NOT EXPECTING THIS!!!]](http://i.ytimg.com/vi/t0Lpgr1jo3Y/mqdefault.jpg)
Other finance TH-camrs quake in their boots when this guy drops a vid with five new acronyms!
Lol. I was shaking my head writing this one. Who comes up with this stuff?!! (Thanks for watching…)
And this, my friends, is why Pete is worth every penny 👌👍
God bless you!
Pete talks to real people in language that we can understand. He never talks down to people. We like that.
Thank you, Carolyn! X
Thanks for the video Pete.
This stuff is more complicated than it a should be. Once the Govt decided to push auto-enrolment and people taking control of their own pension (a good thing of course) then at the same time they really should have provided better support on how to do this - teaching about investing in schools for example.
We shouldn’t have to rely on people on TH-cam taking the time to explain it to us.
For example, moneyhelper’s own website is awful when it comes to calculating your pension income. It assumes a 4% annuity, not linked to inflation, it assumes all tax free cash is taken up front, there’s no way to incorporate ISAs into the calculation etc… etc…
It is actually misleading. The Govt needs to do better. If they really want us to take control of our own future, which they clearly do and is actually a great idea, then please help the general population do this. Don’t assume we know what we’re doing because we really don’t
Absolutely - it’s all well and good giving people control, but they need to understand what to do with it!
I regularly see comments in a similar vein - it's too complicated, we shouldn't need to engage with a financial advisor/planner to take our pensions. The Moneyhelper website is aimed at less well informed individuals, the majority of whom will just take an annuity because it's easy to understand and the income is guaranteed for life. If you are watching this (and similar channels) then you are already in the minority of far better-informed individuals and, I'm afraid, although an annuity might not be the optimal financial approach for other people, it is far simpler and relatively stress-free, which is a critical factor that must be considered. Also, while you are young and numerate, you are well equipped to manage investments and make these very important financial decisions but as you age and move into retirement, you may be less confident in your ability to continue managing your pension in 5,10 or 20 years time.
Forgive me but I think that your assumption that a government wants citizens to have power ("take control of our own future") is incorrect. They may want to have as little responsibility as possible but that does not mean they will help individual citizens to have any control.
Perhaps they the government don't want you to be well informed!?
Glad we cleared that up.
Hahahaha! I know, it’s ridiculously complex.
Fantastic info as usual Pete. Spot on 👍🏻
Appreciate it, Dominic!
I am revising for my FA2 CII exam which I have in two days time and want to say a big thank you for all your excellent and informative videos. They have helped me massively when its come to digesting the info after I read the book - which can be rather dry! But your videos have helped me retain the info so a huge thank you! Great stuff, Pete
Ah, that’s great to hear. Good luck on Thursday, and keep me posted!
Only half way through the video and my brain hurts... 🤣
Imagine writing it.
@@MeaningfulMoney 😆
❤❤❤❤ Thanks for the excellent content Pete
Thank YOU for watching!!
I’m going back to the shallow end! 😂
I wish I could, sometimes!
@@MeaningfulMoneyAs a CFA, I'm sure that you would soon be bored at the shallow end, although it must sometimes feel like "just give me a break from the constant changes" I know my wife felt like that in education.
Thanks for explaining Pete!
Your videos explain pension changes very well, but the whole system is crazy and just gets worse everytime government meddles withe the rules.
great video bud, very informative
Glad you enjoyed it - thank
You! 🙏🏻👍🏻
I took no PCLS when I took my DB pension in 2020 using approx 85% of the LTA. I’ve just received my TTFA Certificate to use when I draw on my SIPP (RBCEs) going forward. The tax free cash I can take is now capped by my SIPP value and not by the Tax Free Allowance.
That’s right. Only way to get the full LSA now would be to grow your SIPP to £1.0731m. But at least you get more than you would under the standard calculation, assuming your SIPP is greater than £161,000 approx
@@MeaningfulMoney Thanks for that calculation of the cross-over point, which agrees with my spreadsheet.
Well done on getting your TTFAC so quickly. I’m still waiting, and very envious! (I’m champing at the bit to crystallize my remaining SIPP before Rachel Reeves changes the rules again!)
Excellent - big thanks. How or where do you apply for a TTFAC? And if you apply for one then do you have to use the Alternative Calculation - or can you still opt to use the Standard calc?
You apply to the providers of your pension(s). And yes, you can choose which calculation you use, I think…
In my case, with Fidelity, they have a good system. I’m very confident that I need the TTFAC, but the fact is that, once issued, it has to stand. You can’t revert to the standard calculation if that’s better for you. However, Fidelity carry out the standard calculation and only issue the TTFAC if it’s more advantageous. If the standard calculation wins, they won’t process your TTFAC application.
@@MeaningfulMoneyis that the past pension providers where you took benefits or the current provider. Eg i took db and avc benefits Inc tfc and still have an in touched SIPP.
Very clear. Thanks.
Glad it was helpful!
this will add a layer of finesse to withdrawal strategies - eg if you’re close to hitting LSA there is no particular reason not to withdraw all tax free cash and let only the crystallised amounts grow as you’ll be taxed anyway, so shaping your income will need some sanity checks
Yep. Welcome to my world!
What do people do with their lump sum ? Buy property to let , drip feed to ISA at 20k cap or GIA with gilts was a holding area and some income funds ?
Back in 2014 I applied for fixed protection at £1.5m and received a certificate giving me evidence for the pension providers
Good. That will be enough to lock your LSA at £375,000.
Is Pete sponsored by Crew Clothing? 😉
I bloody should be. Worn them on nearly every video for years!!
Whoever came up with TTFAC is an acronym genius!
Let's just hope there's more to come in the next round of tinkering with the tax and pension systems.
I can hardly wait.
TTFAC - ta ta for accessing your cash?
Thaks Pete.
Yet more complexity for many though fortunately I haven't started taking my pension. Just hoping the next government don't mess with the tax free allowance or put a LTA back, especially given the fiscal drag of frozen income tax allowances pulling many retirees into the 40% bracket.
Really looking forward to your LTA video!
Reinstating the LTA will be fraught with difficulty. Stay tuned! (And thanks for watching this one…) 👍🏻
Hi, great video as always . I have lump sum question but not sure if there is an answer or it really doesn’t matters. I have a SIPP , DD Pension & APECs . Which one do I draw my lump sum from - my current thought is my DB scheme - reasoning my wife’s pension is much smaller, so this is a way of transferring money to her ( she will get 1/2 full pension either way ) I will then have a reduced guarantee income which will give me more flexibility around tax planning.The disadvantage I see is that it moves more money in to less guaranteed income . I would welcome any advice . Ru
I obtained TTCF certificates from my final salary pensions showing that I have not taken any cash free lump sums. I provided these to my other pension provider from whom I have not yet taken any money. However, they state that I am only entitled to 25% of the funds held by them. Please can you advise whether this is correct?
Great video - I'd tried reading the new sections of the Pensions Tax Manual ("zzzzzzz") - this was far easier - thank you.
Having taken a DB pension in 2021 but only a small tax-free amount from an associated AVC, still contributing to a DC scheme and with a couple of untouched SIPPs that put me right up to the old LTA, I figured there was benefit in applying for a TTFAC. So I duly contacted my DB provider (who paid the lump sum and is still paying me each month)
Their initial response was "as you took your benefits before 6 April 2024, you are not able to be supplied with a Transitional tax-free amount certificate". I queried this and asked for an explanation but all I got back was "as you took benefits prior to 6 April 2024, the new legislation does not apply".
That doesn't seem to align with your video - have I misunderstood something here ?
My advice to workers get the worsed pension available take no extra pensions out you will qualify for all the perks and be a lot better off
Every day is a learning day! I have two questions, which I hope someone can answer:
I am recently retired and living mainly on income from a SIPP until state pension age. My most recent crystalisation event was in March 2024. I have initiated a couple of small legacy DB pensions from which I received the 25% tax-free PCLS
I do not envisage exceeding the lifetime allowance, or the current tax-free PCLS limits but I do want to be cautious and take appropriate precautions, if necessary.
Q1. I shall need to make another crystallisation event later this year. Should I request a TTFAC before doing so? Or, if there has been no previous crystallisation event where less than 25% PCLS was received, is the TTFAC then rendered redundant (because the calculation would be the same in each case)?
Q2. I also have a small GAR pension, which I plan to commence, probably early in the next (2025-26) tax year. I do not intend to take the tax-free PCLS from this pension, in order to maintain the maximum annuity income. Does that have any impact on the actions that I should take?
Q3. I assume that the previous lifetime allowance test at age 75 is now redundant since the lifetime allowance was abolished?
Q4. Is the proportion of the previous Lifetime Allowance used for each crystallisation event still recorded for potential future use (meaning that making a large crystallisation event now is not beneficial)?
I am hoping that the questions are sufficiently generic that they can be answered without constituting personal financial advice.
I am looking forward to the next video about what could happen if we have a future Labour government (and perhaps a lifetime allowance is reinstated).
As always very informative but the figures used are unrealistic for most of us 😢
Having watched this video several times over several days I now feel I have a grip on the situation 😥. I have always kept financial matters simple (concentrated on paying off the mortgage double quickly and one pension pot) and as I have only taken a small sum (£80k) from my drawdown pension so far, the calculation is simple (standard calculation). Having done the maths I remain in exactly the same position as I was previously. So I have spend a few days needlessly concerned that I needed to get to grips with this. The 'standard rule' therefore applies. Deal with things now as delay only leads to stress.
Wow! Not sure I fully understood all of that but it’s certainly reinforced my desire to use the services of a financial planner before taking any pension provision
It does add some complexity, doesn’t it?
Quick general question for anyone without a complicated answer please about the first 25% tax free from a private pension
Is it per pension or only once
Ie if you have 3 pensions can you take 25% tax free from each one
Or is it after you take it from one that is it.
If you take tax-free cash in excess of your allowance and then taxed on that excess at your marginal rate of tax, will the tax be reduced by any unused personal allowance?
Is the pea under the middle cup 😀
Great video - what is the optimal age group for buying the retirement planning course, considering optimal utilisation of the one free year of the voyant plan - thank you !!
Not sure there’s an optimal age. Perhaps within 5-10 years of your planned retirement?
Thanks Pete for this information, I did wonder how the change to the LTA rules would apply to my circumstances. When I left the military I was entitled to a pension. This was valued at approximately 30% of my LTA. My second career allowed me to build up a considerable amount in my SIPP which was in excess of my LTA. I have now retired and triggered a BCE on most of my SIPPs (I have 3). Because roughly 30% was already used by my military pension,even though there was no tax free element to the pension, my £268,000 tax free cash was also reduced by about 30%. Does this mean if I could get a certificate stating I had zero tax free payment from my military pension I could apply to my SIPP providers to pay the balance of my tax free lump sum? Excuse the lack of acronyms.
In short, yes!if you haven’t fully crystallised your SIPP and if you can prove the tax free cash you have had from your SIPP, then you could well be able to claim more cash from it by virtue of you not having taken the cash from your armed forces pension.
FFS indeed! 😉 (Great video Pete) 👏
Cheers bud!
Thanks Pete, really helpful. On the TTFAC issue, what’s the situation if someone took PCLS before 6 April 2024 somewhere between 0% and 25%? How is that deducted from the £268,275? Many thanks
Hi Pete, Found your videos recently and been watching a fair few over the last 24 hours (minus sleep time of course), as someone who is going to be 58 in the near future without much in the way of a future plan, what would you recommend are the first steps on getting on the road.
I’ve applied to the facebook group this morning too (I seem to have a bee in my bonnet lately over getting s**t done).
Useful for retired G60 ifas. Just like going back to the Castle days. 👍😂😂
Ah, G60. Thing is - this is now day-to-day work for us. Did a bunch of these calculation only yesterday for a client.
If you are border line on tax free cash with this fixed limit, is it now not worth doing UFPLS withdrawals because it will be too much hassle?
It’s too complicated! Another opportunity for financial advisors to fleece!! 😢
Or….help? We don’t all fleece our clients. In fact most of us don’t. I’ve built a career on helping people avoid the need to lay for professional advice, yet I’ve never been busier.
...or advise you here for free?
Gosh, I’m a Retirement Planning graduate and my head still exploded about halfway through! I ought to apply for a Transitional…err…Thing…err Wotsit, it seems as it’s far from impossible I could one day reach the TFLS limit. (I annuitised a pension and took nowhere near 25% TFLS) Am I right??
Heres another acronym for you TTFN 🤯 😉
Thanks for being here, albeit briefly
The red background looks like fire and hell... like trying to understand pensions
Ha! Was just trying to complement the shirt, but…
So its now based on tax free cash taken, not total policy value ?
In theory if I had vested a pension valued at twice the LTA figure just prior to april 2024 (lucky me), I would have been forced to pay tax on the excess ( ie half the policy fund value) no matter if i took annuity or tax free cash or a mix.
But with the new rules, if I had waited until after april 2024, I would only have had to pay tax on tax free cash I took in excess of the 268k figure ?
If I had taken full annuity in either case, pre 2024 i'd have paid a load of tax, but post 2024 i'd have paid no tax (i'm ignoring income taxes on the annuity itself) ?
Essentially, yes. LTA abolished, but tax-free cash rules are as per this video.
Great video! So as someone with a DB yet to commence, and a SIPP from which I have taken a couple of tranches of tax-free cash, am I right to think there's no chance of a beneficial TTFAC?
Also, when I come to start the DB pension, the option of tax-free cash (vs commuting into into income) is more attractive than it might have been under LTA, because it'll use up lifetime tax-free allowance whether I take it or not?
Your first question - yes. TTAFCs only available based for benefits taken before 6th April 2024.
Your second question. There’s an example on this page (scroll down quite a way to the section headed ‘Commuting pension for cash’):
techzone.abrdn.com/public/pensions/Tech-guide-tax-free-cash
I am in a similar situation and I am trying to find out more information regarding the new pension rules and DB pension crystallisation at a future date (in my case 5yrs).
@@jocar-1735Thanks, that's really helpful, and yes, it clears up my misunderstanding about lump sums from DB pensions. I did some more reading and video-watching after asking my questions. There's a long AJ Bell video from several months ago (when the April 2024 bill was published) which specifically addresses the options for taking DB benefits.
The majority of younger people in the UK wouldn’t be impacted as their pension savings rates are far too low but its those very people who become confused and disillusioned by all this complexity such that they choose not to engage with their pension and not to make additional contributions to it, thus paying more tax over their working lives and having insufficient retirement savings.
The earlier you save into your pension the better and in my view, given the forever changing regulations and HMRC tax rules, it’s best to contribute as much as you can to your pension, attract tax relief and any employer contributions, reap the benefits of compound growth and review things when you’re 50/55/60 but don’t worry about it.
If you do have so much in your pension pot that you start to run the risk of hitting the TFC limit it’s a nice problem to have and as pensions fall outside of your estate for inheritance tax, your money is in a good place if you have beneficiaries.
Could not have put this better myself - thank you! 🙏🏻
@@MeaningfulMoney I’ve been working in DB & DC pensions for 35 years. I worked through Simplification 2006 but since then pensions have become more complicated each year. I enjoy your video’s and am always impressed by your detailed knowledge and presentation skills!
Pension rules appear to be continually tinkered with by all governments. I wonder how long the inheritance tax free status of pension funds will last for as it seems a little unfair that the generous tax benefits granted to an individual to build their own pension wealth can be transferred over to anyone else rather than to ones spouse.
@@jocar-1735
There are regulations around it which mean the residual pot could be taxable in some circumstances.
Death before age 75
The Lump Sum and Death Benefit Allowance (LSDBA) is the limit on the total amount of tax-free lump sums that can be paid in respect of an individual before marginal rate taxation arises. This includes any tax-free lump sums used up under the LSA, any benefits paid to you as a serious ill-health lump sum before age 75 or any tax-free Lump Sum death benefits payable in the event of your death before age 75. The limit is £1,073,100 but may be higher if you have transitional protection or enhancements.
Lump sums within the available LSDBA will normally be paid tax-free.
Death from age 75 onwards
If you are 75 or over when you die, a beneficiary of your pension pot will have to pay income tax on any withdrawals at their marginal rate (i.e. the highest rate of income tax that they pay).
A very timely video for me, Pete, given that I’ve just applied for a TTFAC. As I read the Finance Act 2024, only UFPLS and PCLS count as the previous tax free cash amounts when calculating the remaining LSA. However, I’ve also seen the HMRC advice that it’s intended to change the legislation to include pre-commencement lump sums. Has that happened yet or is it imminent?
Not happened yet, I don’t think…
How is this impacting people, retiring in 2043?
The pension cap is increased from 40k to 60k, so that you get ducked at 57, when your 25% drifts waaay off 268,275.
this is a brilliant explanation but how on earth is the average person ever going to have a hope of understanding this?! The DWP and HMRC should be required to produce rules that can be understood by non-experts. And Labour have said they are going to change it all back anyway. John Steinbeck quote "I know now why confusion in government is not only tolerated but encouraged. I have learned. A confused people can make no clear demands."
So true. Stay tuned for the next video about what might happen if it comes back!
This needs a part 2: How does these limits restrict the usefulness of the pension wrapper for tax-benefit purposes..?
Yes, it does beg that question.
If you are saving 40% tax on your contributions but only pay 20% on withdrawal then it is an advantageous move.
I also suppose if you are only saving 20% tax on your contributions and also only paying 20% on your withdrawals then you are getting the benefit of that 20%, which would have been taxed as income tax if you hadn't contributed, growing in a share fund until you withdraw it.
Growing tax-free, too. I don’t think the new rules on taking tax-free cash in retirement affect a pension’s merits or otherwise while saving. They are still the best option for most people
FFS sounds like a universal acronym just now!
Tell me about it…!
Hi Pete, i have retirement accounts in both the USA and UK (I know reside in the UK and I'm a uk citizen). Can i access tax free cash from the USA (401k) account? I think I read that I can but can find little advice on this topic
Ooof - not sure on that one. I don’t think your US pension affects the LSA, but I’m also not 100% sure you can take tax-free cash from a US pension in the UK. Needs a specialist!
Question - if I leave the UK and go to live somewhere like Cyprus then what happens about taxation on my pension withdrawals?
If you become a tax resident in Cyprus, that will be how you’re taxed. You won’t be taxed twice as there is a double taxation agreement in place between Cyprus and the UK
Time for low tax, simple tax, rather than BULL SH!T rules 👿
100% agreed. They make it deliberately complicated to keep us plebs under control..FACT!
Absolutely. Should be a flat rate tax on income. Shouldn’t matter it comes from work income, dividends, trust payments, inheritance etc. so no avoiding tax on massive inheritance like the Duke of Westminster or god knows what from footballers, musicians , CEOs etc. tired of getting stuffed for tax.
I actually agree with all of you. We need a MUCH simpler, fairer system, but there’s no political will to get it done because no pollies these days think further ahead than the next election
Still a bit confused here.
I started taking an income from my DB pension in FY 23/24 with no tax free lump sum and was informed that this amounted to 33.9% of the old LTA.
I have a couple of SIPPs amounting to c 720k from which I have not yet taken anything . Can I just take 25% of the SIPPs as tax free cash (probably as UFPLS withdrawals) or do I need to get a TTFAC first?
Definitely apply to your DB scheme for. TTFAC. And you’ll need to do that before you take anything from your SIPPs.
Under the standard calculation, your max TFC from the SIPPs will be £177,329 or thereabouts. With a TTFAC it could be £180,000. Not a huge difference but worth it, I’d say
@@MeaningfulMoney Thanks. Just to confirm, I have to apply to the DB provider and not the institution that I have the SIPP with?
(I spoke to the DB administrator and they said they'd never heard of these!)
Thanks Pete. So just to be clear if you have both a DB and DC pension but start drawing from your DB without taking a tax free lump sum, then this will leave you with the maximum tax free lump sum of £268,275 remaining. In this case could you take more than the 25% tax free allowance from your DC pension or would you also have to build your DC pension up to the value of £1,073,100 to fully utilise the maximum available tax free allowance.
You can’t take more than 25% of your DC value as tax-free cash, so it’s the latter example in your case.
And you would need to apply for a TTFAC to get the max LSA.
Great video, explains alot, appreciate this is a complex area and potentially evolving...
I'd like to know if DB PCLS reduces the TFC of a DC pension.
E.g. if I have a DB pension that has £50k PCLS which is tax free, does this reduce a DC TFC allowance to £268 - £50 = £218k?
If so then as a consequence the amount of pension required to meet full TFC would be 4 x £218k = £872k.
Appreciate with no LTA (although may be reinstated) you can build higher but assuming most bang for buck, then do the two things have to be considered together or separately?
Yes - DB PCLS does interplay with the LSA. Your example is correct 👍🏻
What would be the case if no DB pension PCLS was taken in order to maximise guaranteed pension income - would the new LSA be reduced if the DB pension was crystallised after 6 April 2024 without any tax free cash ?
@@jocar-1735 not an option in my case as its a public sector one and scheme rules are PCLS of 3 x yearly amount, only option is to take pension earlier rather than later which reduces PCLS a bit as a result.
This is the only time I'm glad I've not got that much in my pension. Thanks anyway.
I think this is a case of having a good problem to have.
Blimey, this was complicated and like you say probably one to take advice about. I don't think it effects me🤷♂.
So just wanting to make sure I have understood correctly... Re DB schemes crystalised after April 2024.... If I dont take any tax free cash (and opt for the higher pension) then I would have my full LSA remaining? Which I can then use for any tax free cash from SIPP?
Nope. Only if you took benefits BEFORE 6th April 2024.
@@MeaningfulMoney Oh! Glad I asked!! So AFTER April 2024 if I dont actually take any tax free cash from my DB Scheme then how much LSA will I be deemed to have used? i.e. 25% of what??
@@MeaningfulMoneyGrateful if you could explain further Pete as it is difficult to determine how the new tax free cash limit can be reduced by DB pension crystallisation after April 2024 when no tax free cash is taken at DB pension crystallisation.
Basically the gangsters making you work to uncomplicate their jargon. Hoping you get shafted. Pete is like the George Galloway of finance.
I *think* that’s a compliment! First time I’ve had that one - thanks!
Hi Pete !
Hello, Mark!
two questions
1 - for DB schemes if I don’t opt to take the tax free lump sum, am I free to take the higher income and no impact to LSA?
2 - for a DC scheme if I use my entire pot for an annuity, does the tax free potential affect that or is it ignored?
1 - only if you crystallised your DB scheme before 6th April 2024
2 - ditto.
Anything crystallised after 6th April 2024 will use the standard calculation.
I lost him after 3 minutes. No idea what he’s talking about.
Sorry about that. It’s a complex subject and may or may not affect you.
My pension is complex, but I breathed out when they lifted the old LTA - purely as I was running the risk of hitting it in the coming years - and I had no idea what to do once I had passed it. Also, I am an average person, who has been saving since I was 16 back in 1986 - and my pension output would still only be reasonable to maintain my lifestyle etc etc.. but I have planned and paid for nigh on 40 years to get like this, although some of it I cannot take until I am 67 - so still along way to go.
Forgot to add, I live in fear of a future government meddling with the LTA again, as we need to encourage people to pay into pensions - not deter them.
Totally agree. Stay tuned for the next video, addressing exactly this point!
I think I'm glad I don't have a huge pension pot to fall foul of😂
I wonder if Stephen Hawking ever had a problem understanding pensions. Because to me, it sounds harder than one of his equations. 😅
It’s why people just get annuity or a single 60/40 default fund. Government need to regulate and force providers to offer better guidance, financial MOT every 10 years.
FFS - Obviously, For Further Study 😊
Obviously.
Why should any show evidence of the amount of tax free cash received or not received when the Taxman already knows any cash they have given or not given you in this country. 🤔🤔🤔
Gibberish!
Awww. Thanks!
Too complicated.
Watch the summary at the end, but yes - it IS confusing. Blame the idiots at the Treasury/HMRC for coming up with it
Um, man so confusing
Yeah. It IS confusing. Watch the summary at the end
😩
I know, right?!
This sounds complicated. Does someone need a job and spend their life making things complicated for us mere mortals?! 😂
I understand what you say Pete but I wish you didn't use examples of people with massive figures in their pensions, it makes me feel bad and FFS to you too.
I understand, but in this case it’s only the big-ticket cases that are likely affected.
@@MeaningfulMoney I expected that and understand Pete.
You need big numbers to hit the thresholds or limits and the illustrations have to reflect that. They don't really affect 'average' earners so much
@@MeaningfulMoney make that known in the video title then please 👍🏼
Big congrats to those geniuses at HM Treasury who have come up with our world beating pensions taxation regime that changes every year and that no one understands. I’m sure this is doing wonders to encourage people to save for old age.
Fuck it he is giving me a headache
do they do this to us to baffle us with bs.
Smoke and mirrors 🫣
Indeed.