tax free cash

shiredeon

i have an executive pention plan taken out in 84, i believe there is a caculation by which you can determine the amount that can be taken as tax free cash,
i thought it was something like best three years in ten, although i take a small salary now for a few years it was in the region of 170k, as i am thinking of retiring in the next couple of years i wanted to make sure that i had sufficient funds in my pention to take the maximum cash available, any ideas, cheers.

Debt_Free_Chick

Cash is now calculated as 25% of the value of the pension fund. This is probably better than the amount the old rules would have allowed.

If you are retiring at NRA, then the old rules would have allowed you 1.5 x final remuneration. Final remuneration is the average of the best 3 years salary in the 10 years before retirement, but subject to an overall limit of £100,000. So the maximum cash at NRA under old rules was £150,000. If you are retiring before NRA, it's a pro-rata amount i.e. the years of actual service to the date of retirement as a fraction of the service you would have done to NRA.

I would guess that the new calculation, at 25% of the value of the fund, is probably going to be the higher figure. In any event, if the old rules produced a higher lump sum, you would need to register for "protection" to give you that higher amount.

HTH

shiredeon

i see, so although potentially i could take 255k (funds permiting) the fact that it's limited to 100k means i do not need to worry about increasing my contribution as 25% under the new rules is as good as it's going to get.

Debt_Free_Chick

shiredeon wrote:

i see, so although potentially i could take 255k (funds permiting)

i.e. 1.5 x £170k

the fact that it's limited to 100k

Salary is limited to £100k, so maximum cash is £150k (1.5 x £100k)

means i do not need to worry about increasing my contribution as 25% under the new rules is as good as it's going to get.

Correct. Depending on the level of the fund, 25% of it might be better than the £150k you could have expected under the old rules. Once your fund exceeds £600k you are better under the new rules.

Regards

shiredeon

i see, mind you i don't see my fund breaking 200k as i am 52 now and planning retirement within the next few years, regards.