Lifetime allowance

Discussion in 'Armed Forces Pension Scheme' started by MARTOK, Mar 26, 2011.

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  1. Can anyone explain what the following means, I received it this morning:

    PENSION BENEFITS — REQUIREMENT FOR INFORMATION

    We are writing because we are due to re-assess your pension benefits.

    This re-assessment cannot be completed until we have collected the necessary information. Under pensions tax simplification rules which came into force on 6 April 2006 the re-assessment is considered to be a Benefit Crystallisation Event, which may give rise to a potential tax liability from benefits which were put into payment both before and after 6 April 2006.

    Her Majesty’s Revenue and Customs (HMRC) apply a limit on the amount of pension savings upon which tax relief will be given, whichi s known as Lifetime Allowance (LTA). Sums in excess of LTA will be subject to tax charges. Further information on the LTA and other pensions tax implications can be found on HM Revenue & Customs: Home Page , or alternatively you should contact your local tax office.

    Before we can process your re-assessment, we are required to check whether other nonAFPS/RFPS scheme benefits may affect your overall LTA including your AFPS benefits.

    Please therefore complete and return the attached declaration form as quickly as possible, so that we may then process the pension award.

    I assume the re-assessment is because I am 55 next month.

    I have looked on the hmrc website and if I have interpreted it correctly as long as my pension benefits dont exceed £1.5 million over my life time (fat chance) then there will be no financial penalty.

    I will of course be contacting the pensions office / taxman on Monday but in the meantime any clarification would be appreciated
     
  2. I am assuming that this arises because you left the Armed Forces with an immediate pension before 6 April 2006. Having left before that date, your pension would not have been assessed as a proportion of the Life Time Allowance (LTA).

    55 is the earliest age at which most pensions are payable (AFPS75 is different as entitlements existed before 6 April 2006 and the scheme is closed to new entrants) and it is probably the possibility of other pensions coming into payment at age 55 which has triggered this request.

    You are quite right, not many of us get anywhere near breaching the LTA - in fact, your total pensions need to be over £62K for you to worry - nice problem to have.
     
  3. Your LTA is calculated by adding your pension lump sum to 20 times your pension. The LTA limit was reduced in the budget to £1.5million . Note that any private pension is included in this LTA calculation.

    Any amout that exceeds this LTA is liable to 55% tax.

    No doubt the limit will not be uprated for inflation in future years.