two different pension schemes lump sum

Sheamus

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

hyubh

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.

Sheamus

Ok thanks, not answer I wanted but that is what I suspect is the case

Sheamus

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

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

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

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.

Sheamus

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

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).

klaatu

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