Examples of calculating the Lifetime Allowance
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Sandra's Benefits | Amount |
---|---|
LGPS annual pension | £25,000 |
LGPS lump sum | £45,000 |
AVC taken as a lump sum | £116,375 |
Capital Value of benefits (£25,000 x 20 + £45,000 + £116,375) | £661,375* |
*The capital value is (20 × £25,000) + £45,000 + £116,375
The capital value of Sarah’s benefits is less than the lifetime allowance for 2021/22 of £1,073,100.
She has used 61.63% of the available lifetime allowance.
Patrick's Benefits | Amount |
---|---|
LGPS annual pension | £50,000 |
LGPS lump sum | £120,000 |
Capital Value of benefits (£50,000 x 20 + £120,000) | £1,120,000 |
Excess over lifetime allowance of £1,073,100 | £46,900 |
Tax charge payable on benefits in excess of £1,030,000 (£90,000/20 x12 x 55%) | £15,477* |
*Patrick opted to be paid the benefits in excess of the lifetime allowance as a lump sum. Tax on the lump sum is charged at 55%.
The tax payable is £46,900 ÷ 20 × 12 × 55% = £15,477.
Patrick has used 100% of the available lifetime allowance.