Is a 'tax-free' lump sum classed as taxable income?

bigadaj

dunstonh wrote: »

It wouldnt be called a tax free lump sum if it was ?

Though it is now referred to as the pension commencement lump sum for most schemes isn't it, and many people are suspicious that it may be amended.

mania112

It should always be called PCLS (although the regulator doesn't mind if you still use the term TFC in correspondence), just like how MP is now DC and FS is now DB.

Much ado about nothing really.

EDIT: I think I remember reading something that explained it shouldn't be known as Tax Free because it's actually Tax N/A (or tax irrelevant), meaning it doesn't need to be mentioned on a tax return - very ironic considering the OP.

If the government do 'make a move' on PCLS it will surely be to reduce 25%, which doesn't mean the name change is a clue to anything upcoming.

bigadaj

mania112 wrote: »

It should always be called PCLS (although the regulator doesn't mind if you still use the term TFC in correspondence), just like how MP is now DC and FS is now DB.

Much ado about nothing really.

EDIT: I think I remember reading something that explained it shouldn't be known as Tax Free because it's actually Tax N/A (or tax irrelevant), meaning it doesn't need to be mentioned on a tax return - very ironic considering the OP.

If the government do 'make a move' on PCLS it will surely be to reduce 25%, which doesn't mean the name change is a clue to anything upcoming.

Ok, so from that quote you appear to comsider final salary the same as defined benefit, whereas it can be considerably different.

mania112

bigadaj wrote: »

Ok, so from that quote you appear to comsider final salary the same as defined benefit, whereas it can be considerably different.

Yep, a final salary pension is a defined benefit scheme.

I suppose what you're confused with is that other types of scheme can also have a defined benefit.

I'm not trying to say what the definition of the terms are - just that a Final Salary pension should now be referred to as a Defined Benefits scheme.

... and I don't make the rules, i'm just informing you of them.

jamesd

bigadaj wrote: »

Though it is now referred to as the pension commencement lump sum for most schemes isn't it, and many people are suspicious that it may be amended.

It makes sense to wonder but there are several other tax free lump sums that can be taken in the pension area, so HMRC has been naming and renaming them based on the event that triggers the lump sum. That helps to make it easier to find information about each of the types and reduce confusion about which one is being discussed.

Seven of the events that can cause a tax free lump sum to become available are death (100% tax free if not taken, else 45% unless into pot of spouse), serious ill health (100% tax free up to the lifetime allowance), winding up of a scheme (25% tax free, rest taxed), three different types of triviality - 18k, 2 of 2k for DB and 2 of 2k for personal - (25% for each) and of course the PCLS. This probably isn't a complete list.

bigadaj

mania112 wrote: »

Yep, a final salary pension is a defined benefit scheme.

I suppose what you're confused with is that other types of scheme can also have a defined benefit.

I'm not trying to say what the definition of the terms are - just that a Final Salary pension should now be referred to as a Defined Benefits scheme.

... and I don't make the rules, i'm just informing you of them.

No, the way you wrote your original comment sounded like the only type of defined benefit scheme is a final salary one, which is obviously not the case.

mania112

bigadaj wrote: »

No, the way you wrote your original comment sounded like the only type of defined benefit scheme is a final salary one, which is obviously not the case.

Sorry you misunderstood.

Clearly, though, it says FS is now DB - you've reversed that to DB is now FS.