What chargeable excess, if any, will arise for James in 2020 when taking benefits from the SSAPS?

What chargeable excess, if any, will arise for James in 2020 when taking benefits from the SSAPS?

• A. Nil
• B. €687,107
• C. €1,000,000
• D. €1,500,000

Answer: (A)

The key idea here is that a chargeable excess only appears if the value crystallised from a pension scheme exceeds the lifetime allowance for that year. The lifetime allowance is the upper cap on tax-advantaged pension savings. If you crystallise an amount within that cap, there’s no lifetime allowance charge. In this scenario, the benefits crystallised from the SSAPS in 2020 do not exceed the lifetime allowance, so there is no excess to tax. That means the chargeable excess is zero (nil). If there were an excess, you’d calculate it as the amount by which the crystallised value exceeds the allowance, and the charge would depend on how the excess is taken (typically 25% if taken as pension, 55% if taken as a lump sum).

The key idea here is that a chargeable excess only appears if the value crystallised from a pension scheme exceeds the lifetime allowance for that year. The lifetime allowance is the upper cap on tax-advantaged pension savings. If you crystallise an amount within that cap, there’s no lifetime allowance charge.

In this scenario, the benefits crystallised from the SSAPS in 2020 do not exceed the lifetime allowance, so there is no excess to tax. That means the chargeable excess is zero (nil). If there were an excess, you’d calculate it as the amount by which the crystallised value exceeds the allowance, and the charge would depend on how the excess is taken (typically 25% if taken as pension, 55% if taken as a lump sum).