Order of BCEs when buying an annuity, net of PCLS

Hi, I think I’m unnecessarily getting a headache over a LTA calculation so I just need to confirm something in my head with the experts on here!

• An imaginary client has used 80% of their LTA of £1.25M, so £250K remaining
• They are about to use the value of their personal pension (£400K) to buy an annuity, taking 25% tax free cash (£100K).
• There are two BCEs which occur here….BCE4 – buying an annuity and BCE6 – payment of PCLS.

When purchasing an annuity, which BCE is tested first? I think it is the payment of £100K PCLS?
What about the fact that there is only £62,500 of the PCLS entitlement left? Does this mean £37,500 excess charged at 55%, with the £300K used to purchase an annuity taxed at 25%?



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