3 February 2020

Pension – Lifetime Allowance Calculation

We are delighted to announce that our market leading lifetime allowance (LTA) functionality will be launched on 10 February 2020.

1. Overview:

i4C automatically calculates and applies the lifetime allowance (LTA) charge for all pensions, allowing you to:

  • Add lifetime allowance protections.
  • Add scheme specific lump sum protection.
  • Enter historical information such as the lifetime allowance used to date.
  • Select the order of crystallisation in terms of Defined Contribution or Defined Benefit when taken in the same year.
  • Calculate revalued crystallisations for primary & enhanced protection without a protected PCLS.

Please note:

  • Any previous manually entered LTA charges will have been removed.
  • Scheme specific PCLS will need to be entered.

2. Adding Lifetime Allowance Protections and historical information

You add details of applicable LTA protections and historic crystallisations via the ‘People’ tab within Data Inputs:

  • Go to the ‘People’ tab and select the person you wish to add the protection against.
  • Within the Pensions sub-menu, slide the ‘Lifetime Allowance’ button to ‘Yes’ and choose one of the following from the drop-down list.

o Primary
o Enhanced
o Fixed Protection 2012
o Fixed Protection 2014
o Fixed Protection 2016
o Individual Protection 2014
o Individual Protection 2016

For Primary or Enhanced protection, you will be asked to enter additional information due to the complexities around PCLS protection entitlement.

Important: Update Annually

If the individual is post retirement and making Benefit crystallisations, it is important to update the lifetime allowance section at each review. This will ensure i4C considers any crystallisations since their last review.

Select the order of crystallisation

Defined Contribution or Defined Benefit pensions:

  • You choose the order in which Defined Contribution or

    Lifetime Allowance

    are crystallised if the crystallisation events occur within the same plan year. This may impact which pension the lifetime allowance charges are applied to.

  • The default is to crystallise Defined Contribution pensions first.

Uncrystallised or Crystallised pensions:

  • A similar option is available for the age 75 test and whether to assess uncrystallised or crystallised funds first.
  • The default is to crystallise ‘Uncrystallised (BCE 5b)’ pensions first.

3. Lifetime Allowance on Defined Benefit pensions

You amend the valuation factor and specify whether to treat the LTA charge as an expense or reduce the Benefits using the ‘Adjust LTA’ switch within a Defined Benefit pension.

4. Scheme Specific Protection on Defined Contribution pensions

The maximum PCLS allowable after A-day is 25% of the fund. However, some occupational scheme members with pre-6 April 2006 rights had pre-A-day PCLS rights greater than 25%. Scheme specific PCLS protection enabled the pre-A-day value to be protected. Our system allows for these types of protection, which can be standalone or alongside the different lifetime allowance protections.

To account for Scheme Specific Protection, you enter the A-Day values using the ‘Add Scheme Specific PCLS’ button within the relevant pension.

5. Viewing Lifetime Allowance charge information

The lifetime allowance charge can be viewed using the:

  1. Tax Graph
  2. Cumulative Tax Graph
  3. Data Outputs Tab

Please refer to the community for more detailed explanations.

James Calvert-Jones, Head of Product at i4C Technology said:

“We constantly striving to ensure that i4C can be used by all financial planners for all their clients. From the simplest to the most complex. We aim to do this by combining our marketing leading tax engine with a clear and intuitive user interface.
Lifetime allowance (LTA) charges are some of the most complex rules faced by financial planners and they impact more and more clients due to continued growth in pension funds versus a reduced LTA limit. I am therefore delighted and very proud that i4C now includes such comprehensive LTA calculations within our engine whilst staying true to our goal of being easy to use. Ultimately, this functionally will save Financial Planners time and improve plan accuracy. I am sure will be welcomed by our users.”