6. There is no certainty as to what is going to happen to the LTA in the future – it is not indexed and, if left alone, the value will be seriously eroded by inflation and/or falling annuity rates/Gad rates.
7. Peter was looking to advise Alex about an auto-enrolment strategy for his employees, but it did not feel quite right to be talking about the importance of pensions for his employees and at the same time tell him that he has to cease paying contributions himself.
Peter also had a concern about some of the wider advice issues for these two clients. The investment returns were quite low and therefore the implications of ceasing payment were less if the investment return was achieved. But what about a higher rate of return of, say, 7 or 8 per cent or more?
Ceasing payment of contributions and not meeting the return would create an even greater downside and could even lead to a revocation of fixed protection in order to pay contributions back to an LTA of £1.25m.
In reality, the LTA is extremely likely to change again and it seems that the only way is down – this is an important decision to get right first time.
Mike Morrison is head of platform marketing at AJ Bell.
