PensionsOct 28 2019

Is your client caught by the lifetime allowance?

  • Describe how the lifetime allowance works
  • Describe what happens with a benefit crystallisation event
  • Identify alternatives to hitting the lifetime allowance
  • Describe how the lifetime allowance works
  • Describe what happens with a benefit crystallisation event
  • Identify alternatives to hitting the lifetime allowance
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CPD
Approx.30min
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CPD
Approx.30min
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CPD
Approx.30min
Is your client caught by the lifetime allowance?

This second test measures the growth in value since the client entered drawdown and will particularly affect those with higher pots who take little, or no, income, and achieve good investment growth.

It is crucial to be aware of the second check when considering how much income the client takes before age 75 and the appropriate investment strategy.

But many other factors come into play such as the income tax paid on any withdrawals and the client’s longer-term needs and objectives.

For those clients who never intend to withdraw funds but cascade them on to family, accepting a 25 per cent LTA tax charge on excess funds at age 75 may be the best strategy.

Many people dislike the arbitrary nature of the LTA tax charge and the fact it penalises those clients who obtain good returns on their investments.

However, it is part of the current pension tax framework, and remains a key aspect where people need the expertise financial advisers can bring.

Andrew Tully is technical director of Canada Life

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CPD
Approx.30min
Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.
  1. What is the current level of the lifetime allowance?
  2. What happens if the value of the benefits exceeds the lifetime allowance and the excess stays in the pensions wrapper?
  3. What happens when a benefit crystallisation event occurs, to one's remaining lifetime allowance, if one has taken benefits in different tax years?
  4. When is an alternative benefit to a pension useful?
  5. Applying for individual protection is no longer an option, true or false?
  6. For whom will a 25 per cent tax charge be suitable?
  7. To bank your CPD you must sign in or Register.