Lifetime pension allowance

Thanks mrclondon - yes agree and read that myself. The gov site seems to suggest it is the value of the pot , so assuming all pensions are money purchase then it can be managed and it would make complete sense to start draw down early.  I couldn't see anything on the gov site that took into account actual payments made.

Although the pensionadvisoryservice.org.uk  quotes 

"The Lifetime Allowance is a limit on the amount of pension benefit that can be drawn from pension schemes – whether lump sums or retirement income – and can be paid without triggering an extra tax charge."

Which to me contradicts the gov site.......

So how wiil you know what your pension pot will grow too and what can you do if you think you might go over the allowance?

You don't.

And hence a cynic might take the view that the whole concept of LTA - and esp. at the levels it is now at - and indeed its frequent reduction, and changes to annual allowances, and overall layers of additional complication, are incompatible with the kind of long term financial planning that personal pension provision requires. [rant over]

Of course I'm sure an some advisor will be able to do a highly complex model using estimates of future growth rates using minimum, medium and average growth assumptions, plus model future contributions and come up with an answer. Another cynic might say that the level of uncertainty associated with that is sufficiently high as to make it not worth the virtual paper it would be written on.

Firstly, its not necessarily disastrous (considering you got tax relief on contributions 'on the way in'), but the tax implications are pretty swingeing. Once you throw other avenues for current tax beneficial investments in to the mix (EIS/VCTs) then its probably best to try and avoid.

In terms of actions you can take, there are two avenues:

Fixed Protection: Keeps your LTA at the 'last' banding i.e. £1.25m instead of the 'new' £1m. But you forfeit ability to make any further contributions (from whatever source) beyond the end of this financial period. Not quite sure how this affects DB/Final Salary schemes.

Individual Protection: If your current value is above £1m as of 5th April, then you can apply for individual protection which will give you an LTA at the current assessed value capped up to max of  £1.25m. You can continue making contributions in (whether it makes financial sense to do so is a different matter, and may depend on who is paying that money in).

If this is a serious question as opposed to 'curiosity' I can provide some links. There is plenty of info out there, albeit not always - to my simple mind - intelligibly presented.

EDIT: I started writing this before dinner, completed afterwards. I note now that there have been several interim posts: probably more intelligent than mine.
EDIT2: I also note that given the now juxtaposition of my post to samford71 's mrclondon 's posts, my comments on advisor's modelling might be interpreted as a response to and slur on their's: whereas in the parallel universe I was writing this in those posts did not in fact exist, so no such slur was intended at the point of scribing or subsequently.  Just so we are clear.
EDIT3: I should add and acknowledge that the 'diving deeply into the surface of things' level of knowledge that I do have here is very much thanks to another forum member he helped me to wade through some of this a number of months ago.

Thanks for that James, I think I understand  . But to test my understanding have I applied the following scenarios correctly.

At age 55 I take income of £60,000 from the pot 25% tax free = 6% of LTA
I do this every year each time £60,000, 25% tax free = 6% LTA
17 years later at age 72  - LTA (17*6%) is 102%.  Total remaining pot value is now less than at age 55. But looks as if I'd be over the LTA and be taxed further.

OR if at 55 I took the full 25% tax free sum (and paid full tax on subsequent drawdowns) then the pot would be fully crystalised and LTA not breached.

Thanks

Colin

All correct.

I tend to suggest taking the tax free lump sum as soon as possible because that tends to minimise potential LTA use. However there is another option that can be attractive: wait until markets have suffered a big drop then do the bulk of it. The drop will reduce the value and hence the percentage of LTA used so it'll be easier to stay within it. Handy if you want to make more pension contributions. While it's not guaranteed, market drops of 20% are routine and 40% once or twice a decade things so there's usually some opportunity around the corner. If you're using lots of equities, anyway, not if using mostly P2P, say.

Thanks James. More to build into my model now - keeps me busy