Pensions  

Transitional tax-free amount certificate: when could it be useful?

  • Describe some of the rules about the lump sum allowance and LTA in the run-up to the new tax year
  • Explain how to prepare for them
  • Identify ways to make the most of the new rules
CPD
Approx.30min

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On paper transitional tax-free amount certificates sound like a good way of ensuring everyone can take 25 per cent of their benefits as tax-free lump sums, but the practice might not live up to the dream. 

Rachel Vahey is head of public policy at AJ Bell

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CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. Under the new pension tax rules, people can take 25 per cent of their pension as a lump sum, regardless of the size of their pension pot, true or false?

  2. How much is the lump sum and death benefit allowance usually set at?

  3. If 100 per cent of the LTA was used before April 2024, then what would be the LSA and LSDBA?

  4. What happens if someone did not take all of their previously used LTA tax-free cash allowance?

  5. If the member asks for a certificate but has already taken a tax-free lump sum under the new arrangement, then it is too late – true or false?

  6. If the tax-free lump sums were paid when the LTA was higher, then what is the likely consequence?

Nearly There…

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You should now know…

  • Describe some of the rules about the lump sum allowance and LTA in the run-up to the new tax year
  • Explain how to prepare for them
  • Identify ways to make the most of the new rules

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