M&G PLC · LSE:MNG
M&G — M&G Wealth — Investor Presentation (November 2024)
44 slides from M&G's investor presentation, November 2024
Slide 1: Lifetime Allowance – the final, final chapter…?
Lifetime Allowance – the final, final chapter…? The information that follows is based on our understanding of current taxation, legislation and HM Revenue & Customs practice all of which are liable to change without notice. This is just for UK financial advice professionals.
Slide 2: This content is based on our understanding of current taxation, legislation and HM Revenue
This content is based on our understanding of current taxation, legislation and HM Revenue & Customs practice all of which are liable to change without notice. The impact of any taxation (and any tax reliefs) depends on individual circumstances. Where content includes case studies or examples these
Slide 3: Learning Objective
Learning Objective By the end of this session, you will be able to: Evaluate the impact on your clients of the November 2024 pension lifetime allowance regulations.
Slide 4: Abolition of the Lifetime Allowance kind of…
Abolition of the Lifetime Allowance kind of… …with wide regulation making powers…
Slide 5: legislation.gov.uk search results for lifetime allowance
RS legislation.gov.uk Home | Explore our Collections New Legislation | Help and Guidance | Changes to Legislation Year: Number: Type: delivered by THE NATIONAL | ARCHIVES English | Cymraeg Search Results Your title search for lifetime allowance in the English language of Secondary Legislation from 2
Slide 6: HMRC Pension Schemes Newsletter 158 – April 2024
Home > Money > Businesstax > Pension scheme administrat psions schemes newsletter 158 — April 2024 HM Revenue & Customs Contents Abolition of the Seanstance (LTA) — communicaf From 6 April 2024, information ToSemy continue to be included in regular pension scheftiess guidance newsletters will also b
Slide 7: And…
And… 28th Nov 21st Nov Pension Pension Tax Schemes Manual update Newsletter
Slide 8: The “issues”
The “issues” Protected Tax Lump Sum Overseas TTFAC Free Death Transfers Amounts Benefit
Slide 9: The new approach
The new approach
Slide 10: The new approach April 2024
The new approach 6 April 2024 Lump Lump Income Income Sum Sum Lump Sum Allowance Lifetime Allowance Lump Sum & Death Benefit Allowance Overseas Transfer Allowance
Slide 11: Post April 2024 Limits
Post April 2024 Limits Lump Sum and Death Number Protection Lump Sum Allowance (LSA) Benefit Allowance (LSDBA)* 1 None £268,275 £1,073,100 2 Fixed 2012 £450,000 £1,800,000 3 Fixed 2014 £375,000 £1,500,000 4 Fixed 2016 £312,500 £1,250,000 5 Individual 2014 25% of relevant amount £1.25m to £1.5m 6 Ind
Slide 12: Individuals Starting Allowances
Individuals Starting Allowances LSA and LSDBA LESS Deduction in respect ofTRANSITIONAL DEFAULT LTA used TRANSITIONAL OR TAX FREE AMOUNT AMOUNT
Slide 13: Important information
Important information This tool is designed to calculate the available Lump Sum Allowance ani Allowance between 6th April 2006 and 5th April 2024. It compares the allowances available under the standard default transitional rules and if a Transitional Tax Free Amount Certificate was attained. The to
Slide 14: Lump Sum Death Benefits
Lump Sum Death Benefits Lump sum death benefits Reporting requirements (LSDBs) Payments from funds which Provision of information crystallised prior to 6 April 2024 between schemes
Slide 15: LSDBs
LSDBs Jeff used 90% of his LTA placing his DC pension pot into drawdown in 2022. Jeff has total lump sum benefits of He took £273,100 as tax free cash. £980,000 His LSDBA is £1,073,100 - £273,100 = His LSDBA is £800,000 £800,000 He had uncrystallized funds remaining of There is a taxable amount of £
Slide 16: Benefits that have been through LTA should not be tested again
Benefits that have been through LTA should not be tested again. LTA tested benefits are: - not retested against the LSDBA, and - do not use up LSDBA. Pre April 2024 status follows pots through generations. Schemes will need to pass information on the pre April 2024 values if transferring. Any death
Slide 17: Transitional Arrangements
Transitional Arrangements Transitional tax-free amount certificates (TTFACs) and annual Applications for a TTFAC relevant benefit crystallisation event (RBCE) statements PCLS and uncrystallised funds Cancellation of a transitional tax- pension lump sum (UFPLS) after free amount certificate age 75
Slide 18: Transitional Arrangements
Transitional Arrangements “Certification Administrators” Registered Pension Schemes Annuity Providers Applications for a TTFAC Applications to both allowed Transitional tax-free amount “Notification requirements” certificates (TTFACs) and annual relevant benefit crystallisation Inform all certificat
Slide 19: Cancellation of a transitional tax-free amount certificate
Transitional Arrangements Cancellation of a transitional tax-free amount certificate Bob had a TTFAC allowing him a PCLS of £100,000. Without the TTFAC the maximum he could get was £50,000. He was paid his PCLS and placed the balance in drawdown. A scheme admin noticed Bob’s TTFAC was wrong and canc
Slide 20: PCLS and UFPLS after age 75
Transitional Arrangements PCLS and uncrystallised funds pension lump sum (UFPLS) after age 75 Pre 75 Age 75 Default allowance usage Bob Bob Bob & Roy 50% LTA used Further 50% LTA used. LTA used 100% Took PCLS of £50,000 before April 24 Roy LSA = £0 Roy 50% LTA used LSDBA = £0 Further 50% LTA used Bo
Slide 21: PCLS and UFPLS after age 75 – new default allowance usage
Transitional Arrangements PCLS and uncrystallised funds pension lump sum (UFPLS) after age 75 Age 75 New Default allowance usage Bob Bob Roy Further 50% LTA used. LTA used 100% LTA used 50% Took PCLS of £50,000 before April 24 LSA = £0 LSA = £134,137.50 Roy LSDBA = £0 LSDBA = £938,962.50 Further 50%
Slide 22: LTA Protections
LTA Protections Enhanced protection (EP) Transferring to a new provider Enhanced protection (EP) and Primary protection (PP) Protected lump sum rights of more than £375,000
Slide 23: Transferring to a new provider
Transferring to a new provider LSA LSA Amount of PCLS payable on Amount of PCLS payable on 5 April 2023 from the 5 April 2023 from the arrangement arrangement £360,000 £NIL TRANSFER TO NEW ARRANGEMENT LSDBA LSDBA Amount of uncrystallised funds Amount of uncrystallised funds held at 5 April 2024 in t
Slide 24: Protected lump sum rights of more than £375,000
Protected lump sum rights of more than £375,000 Enhanced Primary Sandi has Enhanced Protection Joan has Primary Protection On 5th April 2023 she had a fund of £1,000,000 Her certificate has £500,000 TFC. Her certificate has 50% TFC. Her permitted maximum is £500,000 Both their tax free cash was capp
Slide 25: Overseas Transfer Allowance
Overseas Transfer Allowance Balance 25% • Overseas Transfer Allowance Overseas Transfer Charge • Starting LSDBA less Transitional Amount Overseas • Overseas TV / overseas benefits DO NOT use Transfer Tax free UK LSA or LSDBA Allowance • “Double bubble?”
Slide 26: Some numbers
Some numbers Overseas UK £ £ 1,073,100.00 1,073,100.00 Overseas Transfer Charge 0% 0% £1,073,100 £1,073,100 PCLS £268,275 £268,275 Balance £804,825 £804,825 Tax (40%) £321,930 £321,930 £751,170 £751,170 Net £1,502,340
Slide 27: Overseas Transfers
Overseas Transfers Benefits Pre A-day crystallised into benefits drawdown
Slide 28: Overseas Transfer Allowance
Overseas Transfer Allowance Benefits crystallised into drawdown Bob had used 100% of his LTA entering drawdown with 25% PCLS. He emigrated to Spain and wanted to transfer his pension into a Spanish pension. His current drawdown value is £600,000 Bob’s OTA is reduced by 100% to Nil. The transfer woul
Slide 29: Overseas Transfer Allowance
Overseas Transfer Allowance Pre A-day benefits Tom had all of his OTA available He never took any LTA tested benefits. And has uncrystallised funds left to take. He did have a scheme pension he started before 6th April 2006 currently paying him £60,000 per annum. Bob’s OTA is now reduced by £60,000
Slide 30: Overseas Transfers
Overseas Transfers 5.32 Reducing tax-free overseas transfers of tax relieved UK pensions – The government will remove the exclusion from the Overseas Transfer Charge for transfers to Qualifying Recognised Overseas Pension Schemes in the European Economic Area (EEA) or Gibraltar from 30 October 2024
Slide 31: Exemptions to the OTC
Exemptions to the OTC • the member is resident in the same country as that in which the QROPS receiving the transfer is established • the QROPS receiving the transfer is established in Gibraltar or a country within the EEA and the member is UK resident or resident in a country within the EEA • the Q
Slide 32: Some more numbers
Some more numbers Pre 30th October Now Now Overseas UK Overseas UK UK £ £ £ £ £ 1,073,100.00 1,073,100.00 1,073,100.00 1,073,100.00 2,146,200.00 Overseas Transfer Charge 0% 0% 25% 0% 0% £1,073,100 £1,073,100 £804,825 £1,073,100 £2,146,200 PCLS £268,275 £268,275 £201,206 £268,275 £268,275 Balance £80
Slide 33: Scheme Specific Tax Free Cash
Scheme Specific Tax Free Cash Calculating a Reduction to an Transferring individual’s lump sum member’s entitlement allowance providers
Slide 34: Policy intent for additional lump sum amount
…..we can confirm that the policy intent is for a member’s additional lump sum amount to be the same as under the LTA …..
Slide 35: Formulae
Formulae Old Rule New “broken” rule (VULSR x ULA/FSLA) + ALSA The A day cash amount times 1.2 Plus ALSA is the amount found by the formula: (Current Fund Value - A day fund value x 0.7154) / 4 [LS + AC - (VUR x CSLA/FSLA)]/4 DPCs not fully excluded Different to pre abolition “Income value” incorrect
Slide 36: SSPTFC case study
SSPTFC case study Bob has an old OPS which is currently worth £400,000. At A day it was worth £200,000 with TFC payable of £100,000 They have Fixed Protection 2012. Maximum cash: Old Rules New “broken” rule £100,000 x £1.8m / £1.5m = £120,000 £100,000 x 1.2 = £120,000 Plus Plus [£400,000 – (£200,000
Slide 37: SSPTFC fixing “CSLA/FSLA”
SSPTFC fixing “CSLA/FSLA” Protection CSLA LSDBA None £1,073,100 £1,073,100 Enhanced (no protected %) £1,073,100 5th April 2024 value Fixed 2012 £1,800,000 £1,800,000 Fixed 2014 £1,500,000 £1,500,000 Fixed 2016 £1,250,000 £1,250,000 Primary (no protected amount) £1,073,100 £1,800,000 Individual Prote
Slide 38: And there’s more….
And there’s more…. SSPTFC rule change …must have at least some LSA and LSDBA available…. Amount over LSDBA Taxable
Slide 39: Case Study
CASE STUDY Bob has available: Lump Sum Allowance of £100,000. Lump Sum and Death Benefit Allowance of £904,825 He has … Scheme 1 – old EPP Fund value £200,000 Scheme Specific PTFC of £150,000 Scheme 2 - SIPP Uncrystallised £360,000 (£90,000 PCLS), Crystallised £200,000 What order to maximise tax fre
Slide 40: Case Study
Case Study Scheme 1 Scheme 2 LSA available -£100,000 LSA available - £100,000 LSA £100,000. LSA required - £0 LSA / LSDBA required - £90,000 LSDBA £904,825 LSDBA required - £150,000 PCLS paid - £90,000 (£360,000 x 25%) PCLS paid - £150,000 LSA used - £90,000 Scheme 1 – old EPP LSA used - £50,000 (£2
Slide 41: Learning Objective
Learning Objective By the end of this session, you will be able to: Evaluate the impact on your clients of the November 2024 pension lifetime allowance regulations.
Slide 42: Question Time
QUESTION TIME
Slide 43: Thanks for your time
Thanks for your time Get in touch with your usual contact if you need further help.
Slide 44: M&G Wealth legal information
M&G Wealth is a trademarked brand of the M&G plc group, which includes 3 business divisions as follows: M&G Wealth Advice, provided by M&G Wealth Advice Limited, registered number: 08022795. Model Portfolio Services, provided by M&G Wealth Investments LLP, registered number: 0C305442. M&G Wealth Pla