We're aware that some users are experiencing technical issues which the team are working to resolve. See the Community Noticeboard for more info. Thank you for your patience.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

two different pension schemes lump sum

Options
I have a defined benefit and a separate defined contribution scheme. My question is whether I can take the 25% tax free lump sum due on the defined benefit scheme from the pot I have accumulated in the defined contribution scheme?
Thanks

Comments

  • hyubh
    hyubh Posts: 3,722 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Sheamus wrote: »
    I have a defined benefit and a separate defined contribution scheme. My question is whether I can take the 25% tax free lump sum due on the defined benefit scheme from the pot I have accumulated in the defined contribution scheme?

    No. If the DC scheme is explicitly linked to the DB one you might, but even then it would depend on the DB scheme's rules.
  • Ok thanks, not answer I wanted but that is what I suspect is the case
  • Ps only thing that does occur to me is though that it is not a matter for the schemes, just a matter for the taxman surely? I have been offered a cash amount and discounted pension salary from the DB scheme. Logically why can't I just offset that same cash amount in the DC pot and take all the FS scheme as pension salary? I dont see the logic of that not being permitted?
  • RickyB2000
    RickyB2000 Posts: 321 Forumite
    Sixth Anniversary 100 Posts Combo Breaker
    Sounds like a fair bit of complexity. How would everyone know what you were doing with everyone else? Sounds messy, which is probably why you can't do it.
  • greenglide
    greenglide Posts: 3,301 Forumite
    Part of the Furniture Combo Breaker Hung up my suit!
    The only way this could be done is with an agreement with the pension provider's overseen by HMRC. For most people there would be nothing to gain and in future potentially even fewer.

    Some DB pension schemes do offer this with their AVCs where they handle them internally and the scheme rules allow them to fund a TFLS but I suspect there aren't many these days. It is crucial that you understand whether you can do this before paying into the scheme, unfortunately many don't do this.

    Where the money is in unrelated schemes there is no link between them and no incentive to create one.
  • hyubh
    hyubh Posts: 3,722 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Sheamus wrote: »
    Ps only thing that does occur to me is though that it is not a matter for the schemes, just a matter for the taxman surely?

    Would be a problem for certain public sector schemes (particularly the LGPS, being funded), since from 2008/2009 they have used a (for the member) poor value commutation rate as a small cost saving measure. That said, for most private sector DB schemes, you're right, the cost to the scheme of lump sum vs. pension is intended to be neutral.
  • The DB scheme has offerd a rubbish commutation value compared to what the income is actually worth. i would still like the tax free cash though of course and my DC scheme has enough in it that I could take it from there. Just seems like commonsense to me. Many thanks to those taking the trouble to reply
  • dunstonh
    dunstonh Posts: 119,594 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Technically, the rules do allow unlinked schemes to be used for paying the 25% TFC. However, no-one does it because of complexity and concerns over liability (as the scheme doesnt want to face the bill for unauthorised payment).
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • klaatu
    klaatu Posts: 144 Forumite
    I wanted to do exactly the same thing (my company closed the DB scheme 5 years ago and offered their DC scheme instead). I contacted our pensions dept and they say the two schemes are completely separate, so I can only take up to 25% of each individually. This seems unfair to me, as the situation of having two pensions was forced on me by the company.

    Steve
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 350.7K Banking & Borrowing
  • 253K Reduce Debt & Boost Income
  • 453.4K Spending & Discounts
  • 243.7K Work, Benefits & Business
  • 598.5K Mortgages, Homes & Bills
  • 176.8K Life & Family
  • 256.9K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.