2 Pensions

jcorbygas

Please could someone help on the following -
Husband has British Gas deferred pension due to pay out in 3 years time. We were hoping to take lump sum and reduced pension. However, he also has a private pension with a transfer value of around £25000. Is the 25% tax free sum available on each pension or are they added together to get the 25% amount. The £25000 is at the moment in a Prudential (ex Scottish Amicable) plan which has not had contributions for many years. If this was cashed in (with tax paid if necessary) then would that mean that no tax free lump sum could then be taken from the BG pension?

dunstonh

s the 25% tax free sum available on each pension or are they added together to get the 25% amount.

Each individually. Not combined.

If this was cashed in (with tax paid if necessary) then would that mean that no tax free lump sum could then be taken from the BG pension?

Tax free lump sum is available on both.

Have you considered taking less lump sum from the BG scheme and more from the Pru (even with the tax)? That MAY be the better option.

AlanP_2

25% can be taken tax free from both pots, anything over that is taxed.

You can't take 25% of the combined value.

So £6250 from the private pension tax free, anything else withdrawn will be subject to income tax.

Exchanging a Defined Benefit (DB) annual pension income for a lump sum is often at a poor "exchange rate". For the Local Gov scheme it is 12:1 (for every £1 of annual income sacrificed you get £12 on the lump sum) but I don't know about British Gas.

Have you and your husband requested up to date State Pension forecasts if you are planning how the numbers might play out?

xylophone

Have you both checked your state pension position?

https://www.gov.uk/state-pension-statement

What is the commutation rate on the BG pension?

jcorbygas

Thank you for your responses. Yes, I am in the process of getting state pension forecast.
The commutation rate for the BG pension from what I have found online is 14.26 - is that a good figure?
We have a set lump sum that we need for our retirement plan so the less we need to take from BG the better.

Actually 14.26 is at age 65 and it is 21.88 for age 50 - Husband will be taking pension from age 60 so I suppose somewhere between the two figures