The Life Time Allowance

Question 1

How are benefit crystallisation events expressed?

Answer 1

As a percentage with 2 decimal places rounded up

Question 2

Which circumstances only tested the LTA against growth?

Answer 2

When drawdown was later used to purchase annuity or where a drawdown was tested against BCE 5 at 75 years old.

Ie deducting the drawdown from the current value to test the excess against the LTA

Question 3

How are pensions that came into payment before A-day tested against the LTA?

Answer 3

First BCE before 2015- LTA used valued at 25x pension in payment at the first BCE after A-Day.

First BCE after April 2015 and are capped drawdown - 25x80% of the maximum drawdown.

Question 4

What circumstances could benefit from a higher LTA?

Answer 4

Transactional protection applied
Overseas transfers
Pension credit from a divorce share order on or after A-day and was in payment after 5 April 2006.

Question 5

How were lump sums taxed?

Answer 5

Excess of LTA taxed at 55% after payment is made.

Question 6

How was excess of LTA drawn as income taxed?

Answer 6

25% before the reminder is allocated

Remainder could then be taxed a marginal rate on top of this.

Question 7

How is taking drawdown valued for BCE

Answer 7

Value of funds designated

Question 8

How is entitlement to pension scheme valued

Answer 8

Scheme pension x 20

Question 9

How are excessive increases to scheme pension payments valued

Answer 9

Additional increase of x 20

Question 10

How is the purchase of a lifetime annuity valued for BCE

Answer 10

Value of funds used to purchase anuity

Question 11

How is Defined benefit at age 75 valued

Answer 11

(Scheme pension x 20) + lump sum

Question 12

How are uncrystalised money purchase funds at age 75 valued for BCE

Answer 12

Value of remaining funds unused

Question 13

How are unused uncrystalised funds designated for drawdown following the members’ deaths valued?

Answer 13

Value of funds designated to drawdown

Question 14

How are unused uncrystalised funds used to purchase lifetime annuity following the members’ deaths

Answer 14

Value of funds used to purchase annuity

Question 15

How are relevant lump sums valued for BCE

Answer 15

Value of the lump sum

Question 16

How are relevant lump sum Death benefits valued for BCE

Answer 16

Value of the lump sum

Question 17

How are transfers to QROPS valued for BCE

Answer 17

Value transfered

Question 18

How are prescribed events valued for BCE?

Answer 18

Value of the payment

Question 19

Describe the situations when a 20xvaluation would be used

Answer 19

Question 20

Describe the situations where a 25x valuation would be used

Answer 20

Question 21

Describe when face value valuation would be used.

Answer 21

Question 22

What are the 3 new allowances

Answer 22

Lump sum allowance- £268,275 (25% of the £1,073,100)
Lump sum and death benefit - £1,073,100 on death benefits - previous lump sum allowance used
Overseas transfer allowance - 25% charge over £1,073,100

Question 23

How are the is the new LSA affected if an individual had utilised their LTA before 6th April 2024?

Answer 23

Question 24

How are the is the new LSDBA affected if an individual had utilised their LTA before 6th April 2024?

Answer 24

Question 25

Name the BCEs from 1-9

Answer 25

1 Drawdown
2 Entitlement to scheme pension
3 Excessive increase to scheme in payment
4 Purchase of lifetime annuity
5a DB remaining age 75
5b MP uncrystalised age 75
5c Unused uncrystalised drawdown after death
5d Unused uncrystalised anuity after death
6 Relevant lump sums
7 Relevant lump sum death benefits
8 Transfer to QROPS
9 Prescribed events