I am retired and I have already exceeded my protected LTA from the crystallisation of my final salary pension schemes. I still have a number of personal pension funds which have never been touched and will hopefully continue to grow until I am 75 (currently 68).
It has been my understanding that when I am 75 and the above funds suffer a 55 per cent tax charge that the remaining 45 per cent of funds can remain invested and when withdrawn will suffer no further tax. Or is it the case that if, having paid the 55 per cent tax charge I then decided to withdraw the balance of 45 per cent, I would also suffer tax on this?
As a higher-rate taxpayer, from my pension funds in excess of the LTA, would I only retain 26.55 per cent of the funds – ie, a combined 73.45 per cent tax charge?
If so, does the same apply to any capital growth arising if I decided to leave the funds invested?
DH
Kay Ingram, chartered financial planner replies:
The lifetime allowance (LTA) is a cumulative allowance for all UK pension savings. Introduced in 2006 the allowance was £1.5mn, rose to £1.8mn in 2012 but has been reduced and now stands at £1,073,100 until 2026. For those who had larger pensions before 2006, and at each time the allowance was reduced, HMRC offered a protection regime to avoid the changes in the lifetime allowance having retrospective effect.