This article provides an example of how we can help clients and IFA’s wishing to understand the intricacies of updated pensions legislation. 

We have a client Dani, who has previously taken benefits in the 2019/2020 tax year. Dani also has an uncrystallised personal pension currently valued at £600,000 with a pension provider.

In the 2019/2020 tax year an old Final salary pension, from a previous employment came into payment for Dani. The pension scheme Throwatus wrote to Dani at the time in February 2020 confirming that 58.86% of the standard Lifetime Allowance had been used in respect of the pension and tax free lump sum.

Fast forward to the present day and Dani wishes to take the maximum tax free lump sum available from her personal pension.

The issue here is that Dani will need assistance to understand the implications of the benefits that she took in the 2019/2020 tax year.

The amount that Dani can receive will be based upon either the Standard Transitional Calculation or the Transitional Tax Free Cash Amount Certificate (TTFAC) .

To demonstrate the difference between the two calculations and the need to carefully plan the taking of benefits, one calculation allows for the maximum lump sum of £150,000 whilst the other calculation will only allow a lump sum of £110,368.34 to be paid.

The most important point is that Dani must take action prior to taking benefits. There are specific requirements in terms of applying for a Transitional Tax Free Cash Amount Certificate. 

A mistake could cost Dani £39,631.66 as a tax free lump sum.

How we can help

We can help you and save you and your firm a lot of time and energy. We provide a report detailing the client’s position under the Standard Transitional Calculation and the Transitional Tax Free Cash Amount Certificate. 

Please drop us a line for a virtual coffee anytime.