5 Ways to Avoid Lifetime Allowance Tax

5 Planning Tips to Avoid the Pension Lifetime Allowance (LTA) Tax

Here, we discuss the top 5 key planning techniques to protect pension funds and avoid pension LTA taxes.

The techniques below are safe and sensible. We wouldn’t recommend clients take any risk with their pension funds with high risk tax ‘tricks’.

Lifetime allowance tax planning is highly specialist. Before you make any changes to your plan, contact us. Let us link you to a pension specialist, allowing you to have an initial meeting and explore planning options before engaging an advisor and agreeing to advisory costs.

Top 5 Lifetime Allowance Tax Planning Ideas – Available NOW

1. Secure HMRC Fixed Protection 2016

It’s not too late to claim. If you haven’t contributed to a pension since 5th April 2016, you can secure a fixed lifetime allowance of £1.25m. Whenever the government makes changes to the allowance, they do offer the opportunity for those most acutely affected, to plan ahead. This time, they have not put a time limit on securing FP16.

2. Claim HMRC Individual Protection 2016

You may still be eligible, if your pension savings at 5th April 2016 were worth more than £1m. The maximum lifetime allowance protection amount available under this allowance is £1.25m. Those with a DB pension will need to obtain a ‘capitalised value’ of benefits at 5th April 2016. Contact your scheme and ask the question, it’s something they’re comfortably with calculating and they will be able to help.

3. Open your pension earlier than you need it, triggering a lifetime allowance test

If you’re over minimum pension age (55 years), you might not need to open your pension yet. However, if your pension funds are close to, or in excess of, the pension lifetime allowance, opening your plan could avoid tax. Taking a pension lump sum is a crystalisation event, meaning an LTA test is triggered.

4. Transfer your UK pension to a QROPS

A QROPS is only normally right for someone retiring overseas. However, a transfer to a QROPS does trigger a lifetime allowance event.

If you fit the profile for a QROPS, it may be time to move your pensions out of the UK tax system. A transfer to a QROPS can trigger the overseas tax charge, dependent on your residence status. Read our guide to QROPS planning.

5. Claim Overseas (International) Protection

This little-known HMRC lifetime allowance protection is available to those who have saved into UK pensions without claiming tax relief on contributions. It is for pension scheme members who have accrued benefits while living and working outside of the UK and can offer a huge enhancement to the normal lifetime allowance.

Get Professional Pension Advice

Only those with high pension wealth will have concerns about the lifetime allowance. Before making any major changes to your pension structure or withdrawal planning, it is vital that you seek professional advice.

A financial adviser will always offer an introductory, or exploratory meeting without charge. This doesn’t mean they’re trying to trick you into paying, but offer you the opportunity to explore the advice option and see how they can help in your planning. Search our international regulator database if you’re unsure of how secure advice is where you live. Contact us if you’d like to be introduced to a trusted and regulated financial adviser.


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