Forward Planning saving me up to £468,331
A Case Study
Pensions are complex things. Rules, regulations and – a feature of recent years – changes to the rules and regulations.
The Lifetime Allowance (LTA) for pensions is actually a limit, not an allowance. If you have UK pensions totalling more than £1 M you will be taxed on the amount over the limit at 55% when drawing capital. The limit started at £1.8 Million but has been reduced to the current limit of £1 Million. Could it go lower? Yes, there is no reason why not.
It would save the government by reducing pension contributions that get tax relief and at the other end, if peoples’ pension pots go over the limit, the government gets extra tax. And with the introduction in the UK of a Lifetime ISA, it is possible this will take over from pensions as we know them today. Especially as there is no tax relief as the money goes into the Lifetime ISA, saving the government £50 Billion per ANNUM in tax relief. The amount of tax collected because of the limit on how much you can have in your pension, in 2015-2016, was £126 Million. And the limit was £1.25 Million then, not the £1 Million now.
So, if you live in Spain can we help with this issue? We can! The secret to this type of planning is to look forward.
By making this relatively simple change I saved the client £468,331 in tax. Of course, I have simplified this example but by looking forward to the problem at age 75, we were able to do something to mitigate the issue. Also, before implementing this planning I went through a series of checks and balances to make sure it was indeed the right thing to do for the person and their family. As you can imagine this person is a happy client.
Sources: Centre for Policy Studies and HMRC statistics