The Retirement Guy

Can you continue working when receiving your state pension?

What are some common retirement planning mistakes?

What is a drawdown pension?

Can you retire early?

How can I track down a lost pension in the UK?

Is the UK State Pension really the worst out of all of Europe?

Why don't you get annual state pension updates?

So who are the winners out of these new Lifetime Allowance and Annual Allowance changes?

Big Winner 1 - Well people whose pensions were above the value of the Lifetime Allowance and due to be tested against it in the near future will benefit significantly!

For example, let’s say someone is retired and is approaching their 75th birthday who crystallised their entire £1 million pension pot in the 2016-17 tax year (7 years ago) when the Lifetime Allowance was £1 million. Let’s assume they took out £250,000 tax-free cash and put the remaining £750,000 into drawdown.

If that person has not touched their drawdown fund since and kept it invested with a pretty aggressive strategy - equities only, resulting in 10 per cent growth a year, by the time they are age 75 (7 years of growth) and the pension is tested against the LTA, its value has grown to around £1,461,000 (£750,000 x 1.1^7). Before the recent changes announced around the Lifetime Allowance, this would have resulted in a 25% charge at the age of 75 on the growth of 25% of £751,537 (£1,461,537 - £750,000) = a £177,884 charge. Now, there will be no charge at all!

Big Winner 2 - People who stopped contributing to their pensions because they would have exceeded the Lifetime Allowance can now consider restarting. Taking it to the extreme, let’s say you’ve got a high earner or business owner who was worried about the LTA and stopped contributing to a pension. They could now potentially contribute up to £180,000 to pensions this tax year by using the new larger £60,000 annual allowance plus unused annual allowances of £40,000 for each of the previous three tax years by using carry forward rules.

Big Winner 3 - People who don’t need their pension and want to pass on wealth to the next generation. The abolishment of the LTA now means that whilst pensions were already a tax-efficient way to pass on wealth as they’re Inheritance Tax free, now they’ve been supercharged and are even more attractive as there is no limit to what they can grow to before a tax charge is due.

For more videos on retirement and pensions follow jamie.kyte or The Retirement Guy

The LTA is being abolished - But how is it going to work in reality?

Pension Lifetime Allowance Is Being Abolished

My last video spoke about the Lifetime Allowance of Pensions being abolished and I thought it would be useful to give you a brief history of how we got to where we are…

The Lifetime Allowance was introduced in 2006 as a way to limit the size of a fund that could be built up on tax relieved pension contributions. It started at £1.5 million, rose to £1.8 million and has been reduced several times since then. At the time of the budget earlier this year, the Lifetime Allowance was fixed at £1,073,100, which meant that anyone who exceeded this amount would be subject to a recovery tax charge on their pension savings. But that has now been abolished! So that’s a brief history!

For more videos on retirement and pensions follow jamie.kyte or The Retirement Guy