Her pension scheme’s rules permit her to take any lifetime allowance excess as additional scheme pension, additional lump sum or a combination. Angela prefers the security of additional scheme pension meaning that a tax charge of 25% of the value of the excess benefits must be paid. For retirements at age 65 (females), the scheme uses a debit factor of 17.79. Her scheme will divide the amount of her tax charge by this factor to calculate the amount to deduct from her pension. This actuarial factor reflects that under Angela’s pension scheme rules contingent dependents’ pensions will continue to be calculated on Angela’s pension before the reduction.
|Capital value of pension entitlement (£47,600 x 20)||£952,000|
|Lump sum entitlement||£142,800|
|Capital value of benefits||£1,094,800|
|Excess over lifetime allowance (£1,094,800 - £1,073,100)||£21,700|
|Tax charge (£21,700 x 25%)||£5,425|
|LTA excess debit (£5,425 / 17.79)||£304.95|
|Angela’s reduced pension (£47,600 - £304.95)||£47,295.05|
Angela’s scheme therefore pays the LTA excess charge of £5,425 to HMRC and it pays a lump sum of £142,800 and pension of £47,295.05 to Angela.
The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.
All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.