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Where Taxpayers and Advisers Meet

BCE5A at age 75

Oldtramp
Posts:16
Joined:Sun Mar 26, 2017 7:20 pm
BCE5A at age 75

Postby Oldtramp » Sat Nov 18, 2017 12:21 pm

3 years ago, aged 56, I crystallised a SIPP, valued then at £660000, taking the the 25% lump sum of £165000, but leaving the remaining £495000 invested, without drawing income. This has since grown, thorough dividends and investment gain to £760,000. In 2014 I also stopped paying into a DB pension scheme, then valued at £838,000 (20 x pension plus lump sum) and took out FP14 (£1.5m) and IP14 (£1.48m). Next year I retire (sort of, though continuing with one employment and some consulting) and crystallise the DB pension. The value of this has risen above the 2014 estimate owing to inflation but, by commuting income to lump sum, I can bring it below the £840000 LTA remaining (£1.5m FP minus £660000 = 44% used). Sometime over the next 5 years, as consulting work gradually dries up and the P/T job ends, I'll start drawing income of the SIPP, preferably at around the natural yield rate of £24000 p.a. (i.e take dividends without eating capital). So far so good.

Am I right, though, to think that there's a further valuation test at age 75 (BCE5A) at which point post-crystallisation growth in the the SIPP (Value on 75th birthday minus £495,000, I assume) is reviewed against remaining LTA (=£0 in my case, unless there is dramatic inflation leading to radical rises in the LTA above £1.5m)?

Evidently no one can predict stock-markets, tax or political developments over 16 years, nor whether I shall survive to 75. But, on the figures above, there's already a £265000 gain, potentially liable to penal tax rates and, if I only draw natural dividend yield, then this is more likely to increase than to shrink. If this is correct there are arguments (a) to draw more income from the SIPP than I originally intended, to stop the capital value rising too high, reinvesting 'surplus' income into EIS or VCTs to minimise the tax hit.

But, am I correct in my understanding of how BCE5A works?

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