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The importance of Lifetime Allowance within a Cashflow

Lifetime Allowance in Cashflow

The lifetime allowance is the overall limit that you can build up in pension benefits before a lifetime allowance tax charge applies. In 2011, the lifetime allowance was at its historical highest limit of £1.8m but was gradually reduced to £1m in 2016 from where it would be increased by CPI each year.  

With a lifetime Cashflow Modeller, it is crucial that lifetime allowance is handled correctly and applied within a client’s current position to illustrate when an expected standard of living may have to be adjusted to cope with this potential tax charge of up to 55%.

It is becoming increasingly important to have the functionality to look at ‘What if’ your client crystallised pensions in a different order or by a different withdrawal style or maybe they achieved a different investment growth?

These are some of the most important questions advisers are facing today and FinCalc’s latest addition provides the tools to help answer these questions and clearly show clients the impact of lifetime allowance in their financial planning.

FinCalc’s Cashflow Modeller now includes:

  • All HMRC lifetime allowance protection types
  • Tax Free Cash protection (inc. Primary, Enhanced and Scheme Specific)
  • Historical BCEs can be entered to calculate revalued crystallisations for Primary protection and Enhanced protection without tax-free cash protection
  • Using uncrystallised or crystallised funds for withdrawals from DC funds
  • Lifetime allowance charge recoup factor for DB schemes
  • Smart advisories to point out potential issues which your clients may encounter and highlight the impact of lifetime allowance on their retirement.

Including lifetime allowance within a lifetime Cashflow Modeller will save so much time for advisers and follows on from the inclusion of full income tax calculations. The impact of any lifetime allowance tax charge is clearly detailed in the results output and is extremely powerful for advisers when helping clients move from pensions accumulation to decumulation.

FinCalc - In the Press

This has been referenced in Financial Planning Today and in Professional Paraplanner!

About the author

Gavin Shears

Gavin Shears

Senior Product Consultant

Gavin has been working in the Financial Services industry for over 20 years. Gavin joined O&M in 2005 as a paraplanner and transfers technician. After achieving Pension Transfer Specialist status, he moved to the IFA team in 2008. Gavin now works as a key component in the FinCalc arena using his knowledge of Financial Services and the advice process to help with the continuous development of the FinCalc suite of advice tools.