How would lifetime allowance test be applied in the future - is it a % or amount test

[grc_too]

Hi

If I used up 100% of my lifetime allowance now, but save a proportion of my SIPP untouched with the aim of passing the SIPP on to my children in say 25 years time (I am assuming I am that lucky!) - how would the lifetime allowance test be applied.

Assuming that the lifetime allowance has doubled in that time (cpi ~2.8% for 25yrs)

Will the test be applied as a percentage - I've used 100% now and therefore I've still used 100% in 25years time therefore there is no extra head room? (Therefore my SIPP will be taxed in full - 55% for lump sum)

or

Will the test be applied as an amount - I've used £1M now - in 25 years AA will be £2M - therefore I have £1M extra allowance - so my SIPP can be passed on without Annual Allowance tax charge as long as its value is less than £1M?

(I understand that if I am over 75 at dod then the SIPP would be additionally taxed as income tax)

Thank you for taking time to read

[AnthonyR]

It's a percentage test.

So if you crystallise £1m today you've used 100% (assuming you don't have a higher protected LTA), meaning that if in 25 years time it's £2m you've still used 100% and don't benefit from the increase.

If you crystallise £500k you'll have used 50%, leaving you 50% to crystallise in future, which at £2m will allow a further £1m to be crystallised in future.