# LTA Mindblock

Member

Afternoon All
Sorry if this appears like a simple question, I am working on a complex case with varying DB/DC schemes and I am confusing myself now.
Question: Does any unused LTA allowance still increase with CPI (under current regs obvs)? Example; client takes DB at 65 and uses £400K of allowance (20 x £20K DB income). Assuming LTA of £1.4M at 65 for this client and they have used £400K, does the £1M still increase each year by CPI? Voyant is showing that it does as the next DC crystallisations at 75 show the £1M plus the CPI growth.

Just wanted to check this was correct.

Thanks

Nathan

• Member

Sounds right to me, the test at 75 would be against the LTA at that time so the CPI increases from 65 to 75 should reflect this.

• Member

I think this is how it works:

When the client crystallises £400,000, they use 28.57% of their LTA (£1.4m). When they next crystallise benefits, they have 71.43% of whatever the LTA is at the time available.

So yes in answer to your question, thats how voyant does it.

• Member

Perfect, yes just discussed further and totally makes sense. It's one of those things you always know but confused myself by over thinking this. For anyone using Voyant, the Pensions Detailed report is a cracking report for the numbers on all this.

• Moderator

The amount crystallised is revalued by the increase in the LTA between BCEs.

In your example £400,000/£1,400,000 = 28.57%
CPI at 2.5% for ten years makes the assumed LTA £1,792,118.

The revalued BCE from age 65 is £400,000*(1,792,118/1,400,000) = £512,033
This leaves £1,280,085 LTA remaining.

Benjamin Fabi FPFS
Chartered Financial Planner

• Member

Cheers Ben, all makes sense.

• Member

Yes, it's all done on percentages rather than the £ and p amount crystallised

• Moderator
Problem with using percentages is that the rounding down under-values the amount used. If you have a couple of bce this isn't a big issue but if you have phased FAD over ten years it can stack up.
Benjamin Fabi FPFS
Chartered Financial Planner

• Member

Coming back to this one, if a client crystallised benefits of £576k in 2007/08 with an LTA of £1.6m, then opted for Fixed Protection 2014, I assume the 07/08 crystallisations would still be tested/recorded as being against the higher LTA in place at the time rather than the protected LTA of £1.5m?

How would this be revalued to be tested against the lower protected LTA in place? The client has c£115k in an uncrystallised pension and will turn 75 in a couple of years, so there will be that test unless they crystallise earlier. It seems they've used c36% of the LTA, leaving then with 65% to test future BCEs against?

Mind block here as well!

On a different note, does anyone else find it difficult to gain LTA crystallisation info from new clients - how do you get around it?

Thanks

• Member

@Jenni said:
Coming back to this one, if a client crystallised benefits of £576k in 2007/08 with an LTA of £1.6m, then opted for Fixed Protection 2014, I assume the 07/08 crystallisations would still be tested/recorded as being against the higher LTA in place at the time rather than the protected LTA of £1.5m?

How would this be revalued to be tested against the lower protected LTA in place? The client has c£115k in an uncrystallised pension and will turn 75 in a couple of years, so there will be that test unless they crystallise earlier. It seems they've used c36% of the LTA, leaving then with 65% to test future BCEs against?

Mind block here as well!

On a different note, does anyone else find it difficult to gain LTA crystallisation info from new clients - how do you get around it?

Thanks

"On a different note".. get it from the scheme adminstrator or trustee.