Next Generation Technical Support

News

Lifetime Allowance Planning with QROPS

Lifetime Allowance Planning with QROPS

Lifetime Allowance Planning using QROPS

Background

The Lifetime Allowance (LTA) is the maximum amount of tax relieved pension   that can be built up over an individual's life.

The standard lifetime allowance is currently set at £1 million.

Benefits in excess of the LTA (if paid as a lump sum) are taxed at 55% if   paid as a Lump Sum, or 25% if retained to pay benefits.

Fixed Protection

An individual can choose to protect their LTA from 6 April 2016 at the 2015-16   level of £1.25 million by applying for fixed protection 2016 (FP2016).

If an application for FP2016 has been accepted by HMRC, the client will be   sent a certificate which they should show to their pension scheme   administrator when they take any benefits from the pension scheme.

No further UK tax relieved contributions are permitted once fixed protection   has been agreed.

Individual Protection

Individual protection 2016 (IP2016) is available for clients whose funds   exceeded £1m as of 6 April 2016.

Will give a lifetime allowance equal to the value of pension rights on 6   April 2016 - up to an overall maximum of £1.25 million.

An individual will not lose individual protection 2016 by making further savings   in to their pension scheme.

LTA Planning using QROPS

A transfer to QROPS is a Benefit Crystallisation Event (Transfer to another UK Scheme is not deemed to be a BCE unless   benefits or withdrawals are taken at the same time).

Under current rules, once the pension funds have been transferred to QROPS   they are able to grow without further assessment as regards lifetime   allowance limits.

If a transfer is not made and a benefit crystallisation event occurs within   the UK scheme a lifetime allowance charge would be incurred.

Once the LTA figure has been breached a tax of 55% will be charged on the   excess growth surplus at the next BCE. This is a point in the future which is   triggered by a change in the pension status.

QROPS are available to UK and non-UK residents.

Please see attached a PDF version of this document including a case study.

Become a member for as little as £25/month