Civil Service Pension- Inverse Commutation & Recycling

Ossiedog

I have taken voluntary early departure/early retirement and am using my award to offset the actuarial reduction in my pension. There is also an option to use my pension lump sum to buy added years, inverse commutation. In the blurb provided when I applied for the voluntary departure scheme it specifically warns you to look at HMRC's recycling rules if you intend to do this but my pension provider says that these do not apply to inverse commutation. I have been unable to find any clear advice on this. Has anyone had any experience of this?

Loex

On retirement can you invest more than 30% of your lump sum without falling foul of the recycling rules.

Say £60k lump sum - is the limit £18k (30)%) on tax free inverse commutation

If it is but you still want to invest the rest ie £42k what is the effect of that where taxable income through pay was £29k + pension value for the year was assumed £ 5kwhich would leave £8k potentially taxable. But this is within the annual allowance of £50k. So no tax? > Is that how it works?

Going to have to professional advice because don't know who in the Civil Service will advise though they certify tax position from Oct 2012 apparently but too late for me.

Any thoughts please?

Goldenyears

Ossiedog wrote: »

I have taken voluntary early departure/early retirement and am using my award to offset the actuarial reduction in my pension. There is also an option to use my pension lump sum to buy added years, inverse commutation. In the blurb provided when I applied for the voluntary departure scheme it specifically warns you to look at HMRC's recycling rules if you intend to do this but my pension provider says that these do not apply to inverse commutation. I have been unable to find any clear advice on this. Has anyone had any experience of this?

I considered inverse commutation (it's not added years btw, its a % return based on age and gender and used to be ~5% ). For various reasons I chose not to but we are all different). I do not believe you will have any problem with the recycling rules which are irrelevant for that option. Assuming this is Classic there was only a rule on the maximum amount of lump sum you can commute to pension. I think was £96K.

I had to look at the recycling rules because in order to reduce my 40% tax liability I bought additional pension by lump sum in the year before I retired from the CS and after my added years contract finished aged 60. This was a different procedure to inverse commutation which is something you choose at retirement