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FAQ – Should I Worry About Lifetime Allowance?

For an illustration of just how powerful compound interest can be, consider how much a pension can grow with just 5% net growth a year:

  • £200,000 fund from age 30 = £1,100,000 at age 65
  • £300,000 from age 40 = £1,015,000 at age 65
  • £500,000 from age 50 = £1,039,000 at age 65

Increasing numbers of retirement savers are being caught out by LTA. The Lifetime Allowance used to be £1.8m; for most people In 2019/20 it is £1,055,000 and 2016-17 saw a 2,100% increase in the government’s LTA tax take, when compared to 2006-07, with any savings above the LTA threshold subject to 55% at the point of cashing out.*

However, it is worth remembering that paying the LTA tax is not always a bad thing. In some cases, retirement savers may only attract the tax because they have succeeded in saving more for their retirement than they had originally planned. The fact is, if you find yourself surprised by the LTA, you have done well: if you had put the money into a savings account or stuffed it under a mattress, you would not have a sum that exceeds the threshold. But luckily, if you keep track of your pension funds, there are ways to plan for the LTA.

Planning for the Lifetime Allowance

Just as the best way to build for a wealthy retirement is to plan and save early, the best way to minimise the impact of the LTA on your pension fund is to take action at the earliest possible opportunity.

Keep a close eye on your possible exposure to the LTA and if you find you are edging close to the limit, you can consider ending your contributions, reducing them or channelling your money into alternative and more tax-efficient investments. For some, early retirement may a be a reasonable way to avoid LTA charges. It is advisable to sit down with your expat financial adviser to consider crystallisation events and the possibility of overseas pension transfers – for example into a QROPS or SIPP.

Expat Pension Planning with Blacktower FM

Blacktower Financial Management’s expat financial advisers can help with all aspects of cross-border wealth management, including pension planning for the LTA, overseas transfers and inheritance planning.

Contact us today for more information about how we may be able to help you make the most of your retirement accounts and cross-border financial situation.

Disclaimer: Blacktower Financial Management is not a tax adviser and independent tax advice should be sought. The above does not constitute advice and Blacktower makes no recommendation as to the suitability of any products or transactions mentioned..

* https://www.investorschronicle.co.uk/managing-your-money/2018/04/26/avoid-falling-foul-of-the-pensions-lifetime-allowance/

Other News

Many Grandparents missing out on full state pension

Grandparents and FamilyThe ex-pensions minister Steve Webb is urging the government and the HMRC to do more to alert grandparents to all the pension perks they’re entitled to after it was revealed that the overwhelming majority are not receiving the full state pension. By missing out on a particular benefit, unknowing eligible grandparents are missing out on £231 a year. Over the course of their full retirement, this could possibly lead to a loss of thousands of pounds.

It is a scheme called the Specified Adult Childcare Credit. It is thought that only 1,300 grandparents are taking advantage of it despite 100,000 being eligible (a mere one per cent). The scope of the problem was found out by Webb when he sent a Freedom of Information request to the HMRC.

The purpose behind the Specified Adult Childcare Credit is to allow grandparents who give up work completely to help raise their grandchildren the chance to claim National Insurance (NI) credits.

Read More

QROPS in France – Still a Suitable Scheme Post Brexit?

Pensions are integral to retirement planning, but what does uncertainty around Brexit mean for expats in France and their options regarding a QROPS or SIPP pension transfer.

Despite the uncertain climate, one thing is clear: QROPS or SIPPs still offer plenty of attractive possibilities for British expats residing in France.

As ever – Brexit or no Brexit, deal or no deal – the best thing to do is to sit down with your wealth manager or financial adviser to discuss your retirement objectives, your legacy plans, your current financial circumstances and your attitudes to investment risk and investment growth.

Read More

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