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Posted Tue, 09 Jul 2024 21:41:57 GMT by Veterans84 Powell
I have an armed forces pension which commenced payment in 2000. A small tax free terminal grant (less than 25% of the equivalent pension value) was paid at the commencement of the pension. In 2016 an additional defined benefit pension was commenced, 25% of which was taken as a tax free lump sum. PTM 174300 states ‘In addition, if the member had a pension in payment before 6 April 2006, 25% of the amount of the deemed BCE under paragraph 20 Schedule 36 FA 2004 that occurred immediately before the first BCE is included in the lump sum transitional tax-free amount ‘ This seems to imply that not only will my small tax free terminal grant be included in a Transitional Tax Free Amount Certificate calculation but also 25% of  the proportion of LTA used by my armed forces pension, which has been subject to income tax in its entirety and the only tax free cash taken was a small terminal grant which was considerably less than 25% of the pension value. Am I reading the legislation correctly and if so this appears to be treating  Veterans unfairly ?
Posted Tue, 16 Jul 2024 13:17:34 GMT by HMRC Admin 10 Response
Hi
Please refer to the additional guidance at PTM174100 AND PTM17200.
Posted Tue, 16 Jul 2024 16:41:49 GMT by Veterans84 Powell
Hi, thanks for your response. I am sorry, but PTM174100 just contains the same paragraph as PTM174300 ‘In addition, if the member had a pension in payment before 6 April 2006, 25% of the amount of the deemed BCE under paragraph 20 Schedule 36 FA 2004 that occurred immediately before the first BCE is included in the lump sum transitional tax-free amount ‘ None of the examples cover a pension which has commenced prior to April 2006. I cannot find any document entitled PTM 17200. My question is simple,. In plain English is it possible for you to state what the above paragraph means with reference to military pensions commenced prior to April 2006. Does the paragraph mean that 25% of the pensions equivalent LTA value will be added to the lump sum taken calculation on the certificate. If this is the case, as the legislation is intended to prevent an individual obtaining more than £268,275 tax free from any pension schemes this is clearly an inaccurate calculation for military veterans pensions.
Posted Thu, 18 Jul 2024 07:45:50 GMT by HMRC Admin 25 Response
Hi Veterans84 Powell,
As per the wording - If an individual has had one (or more) BCEs occur prior to 6 April 2024, these events must be reflected when calculating the individual’s remaining lump sum allowance availability via the standard transitional calculation.  

Where the individual doesn’t hold a valid transitional tax-free amount certificate, this is achieved by deducting 25% of the individual’s lifetime allowance previously-used amount from the lump sum allowance.
For most individuals this is £268,275, unless they hold a valid protection.   

If the individual’s lifetime allowance previously-used amount after the 25% deduction, is greater than or equal to the lump sum allowance, then the individual’s lump sum allowance after applying the transitional calculation will be nil.
This means the individual will be unable to take further lump sums tax-free.                                                                                                                    This guidance applies to everyone and no matter where their pension is from.
Thank you. 
Posted Thu, 18 Jul 2024 14:52:59 GMT by Veterans84 Powell
Hi, Once again thank you for your quick reply which is all understood. Sadly it does not address my specific point concerning pre-commencement pensions where benefits commenced before April 2006. In my example of the Armed Forces Pension scheme where the tax free amount taken at commencement is a small fraction of the assumed 25% of the equivalent LTA value. It appears veterans are being discriminated against and having the amount of tax free cash they can claim limited by the the following section ‘ In addition, if the member had a pension in payment before 6 April 2006, 25% of the amount of the deemed BCE under paragraph 20 Schedule 36 FA 2004 that occurred immediately before the first BCE is included in the lump sum transitional tax-free amount ‘ I will phrase my question another way, if a veteran can show by historical letters how much tax free cash he received prior to April 2006 does this override the assumed fact that 25% of the equivalent LTA value was taken ?
Posted Tue, 23 Jul 2024 09:40:11 GMT by HMRC Admin 19 Response
Hi,

You can see the guidance on pre April 2006 lump sum rights here:

PTM063100 - Member benefits: lump sums: protection of pre-6 April 2006 lump sum rights

Thank you.

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