final salary pension question

penquest

I have 2 final salary pensions that i can take now, both have a lump sum payment (one 22000 and other 17500) will I be taxed on these when I take them or will they be tax free?

mgdavid

normally tax-free

xylophone

These are your Pension Commencement Lump Sums?

https://www.moneyadviceservice.org.uk/en/articles/your-pension-lump-sum-options

jamesd

They will be tax free but it is often a bad idea to take them. How much would you get from each and how much will the ongoing income be cut for taking the lump sum?

Usually it's a better deal to not take the lump sum from final salary pensions or if a lump sum is needed to use savings or say equity release then pay that off with the some of the higher income. Not always, though, id does depend on the specific scheme.

jem16

jamesd wrote: »

They will be tax free but it is often a bad idea to take them. How much would you get from each and how much will the ongoing income be cut for taking the lump sum?

Many schemes have an automatic lump sum of 3 times annual pension and you have no option but to take it. A few allow inverse commutation but very much in the minority.

mgdavid

jem16 wrote: »

Many schemes have an automatic lump sum of 3 times annual pension and you have no option but to take it. A few allow inverse commutation but very much in the minority.

Many? or just some? My 3 bits of DB didn't have any compulsory lump sums - maybe I was randomly lucky?

jem16

mgdavid wrote: »

Many? or just some? My 3 bits of DB didn't have any compulsory lump sums - maybe I was randomly lucky?

Well certainly all the ones I have come across so far, both Public Sector and private.

greenglide

I was in LGPS in the 90s and when I reached 60 (scheme retiring age at the time for the combination of date entered, date left etc) and deferring (which is what I wanted) wasnt allowed and reverse commutation was extremely limited so I had no choice but to take the pension and mast of the lump sum.

The private scheme I am an active member of has not automatic lump sum and never has had but I can commutate the (very limited) pension to get a lump sum. Fortunately I can pay AVCs (with salary sacrifice) and use those to generate a lump sum.

penquest

The Teachers Pension is a compulsory lump sum (with the option of taking a smaller pension and larger lump sum) the 17000 is enough without taking extra. I am looking at taking the lump sum to pay off the mortgage which will come to the end of a 3 year fixed term at the same time, so I will be able to make a lump sum payment without additional charges.
Will both lump sums be tax free or only the TP?

jem16

penquest wrote: »

The Teachers Pension is a compulsory lump sum (with the option of taking a smaller pension and larger lump sum) the 17000 is enough without taking extra. I am looking at taking the lump sum to pay off the mortgage which will come to the end of a 3 year fixed term at the same time, so I will be able to make a lump sum payment without additional charges.
Will both lump sums be tax free or only the TP?

Both lump sums are tax-free.

kangoora

Deferred military pensions pay a lump sum of 3 x pension on commencement.