Calculating pension 'pot' size

MikeSuzuki

Hello folks at MSE forums,
I came here having read Martin's emails for some years and have rediscovered that I'd registered to the forum some while ago and forgotten!
I've got a simple enough question which I feel I should have been able to get a crisp answer to by googling, but I've ended up more confused. I wonder if anyone can help me?
It is 'how do I calculate the size of my pension 'pot'?
I am 55 in April and considering retiring. I have 23 years final salary pension which is deferred (I got made redundant in 2011) and also AVC pension investments made through the employers' provider when I worked for them. Finally, I have a standalone SIPP with H-L.
I am no longer contributing to any pension scheme as I have registered for FP2014 and have a certificate from HMRC to this effect.
My question is exactly how is the size of my 'pension pot' calculated? I am confused despite much reading.
I am troubled that I am close to the LTA (£1.5M under FP2014) but I do not know how to calculate my 'pot' size correctly.
I believe it is 'annual pension from FS scheme x 20' plus AVCs / SIPP fund value. However I do not know how to treat a tax free commencement lump sum in this calculation. If 25% of the 'pot' calculated as above is taken from the AVCs (I have sufficient), is this then (i) deducted from the value of the AVCs in the above calculation and then (ii) added back to the sum used to calculate the pension 'pot' size?
I was troubled to read that the calculation is 'annual pension from FS scheme x 20' plus AVC/SIPP fund value plus tax-free commencement lump sum. This would seem to be double-counting unless that lump sum is first deducted from the AVC/SIPP, before being added into the calculation. The reason this troubled me is that it would take me over my FP2014-related LTA of £1.5M. I do hope that isn't correct.
I appreciate I've been fortunate to have been able to make these pension savings over the years. This is in many ways 'a nice kind of problem to have'.
Thank you for any help,
MikeSuzuki

jamesd

No double counting, one way of calculating assumes that the lump sum has been taken, the other that it hasn't been. If you have AVCs they would in general be valued at their market value and added to 20x the rest of the pension entitlement value to get the combined total. This way of calculating disregards the income potentially available from the AVCs. Looking from the other direction, the 25% taken would have its own 25% value and the rest would be valued at its income-related value.

Ignoring the FP2014 aspect, in general a person could reduce the percentage of LTA used by taking benefits before the LTA is reduced, since LTA is tracked as a percentage used of the LTA at each crystallisation event. For personal and defined contribution pensions you can also do things like crystallising during market downturns to reduce the percentage used at each crystallisation event. Then you can draw maximum income to reduce the potential LTA value at age 75.

MikeSuzuki

James,

Thank you. I appreciate you taking time to clarify that for me.

Best wishes,
Mike