Originally Posted by
Lima Juliet
Not great, but not the end of the world either? As I understand it, the LTA is set at
£1,073,100. So that will see any pensionable income above 20x your annual pension and any tax-free lump sum combined above that figure will be taxed at 25% for the annual pension and 55% for the lump sum. So to exceed that, then you would need an annual pension of
£53,655 - or say £48K per year plus a £113,100 tax-free lump sum - to get to that threshold, and then it is only the EXCESS that is taxed above those sorts of figures. So this really is a 1st world problem and even then, if your pension is above that, you will still see (according to Baldrick) “some beans” but it won’t be “no beans”.
Personally, if any of mine gets taxed above that at 25%, before the 40% income tax is taken, then I will be OK with that. As I say, not great, but if it helps pay off the Country’s debts then so be it.
You’re right, but the LTA is frozen until April 2026, so it’s not just the current situation that’s an issue - in five years time, many more currently in affected will be within scope.
Added to that, many impacted or likely to be imminently impacted, will leave AFPS either tipping just over it or nudging it, and will still have ten years of working life left, presumably continuing to accrue in some corporate DC scheme - it’s not just DB accrual which is the issue.
Or, in two or three years, income in retirement gets subject to either NIC or rather more likely, a harmonised taxation rate which includes Income Tax and NIC. This measure impacts those still saving and those not in retirement. It seems to be unfair in that respect.