Lump Sum Pension Advice Please......

londondealer

Just need some advice with regards to taking the lump sum element from my pension.

I am in a final pension salary scheme and my lump sum is going to be 70k.

I also have another pension fund that i paid into separately and that total i can draw out will be 16k. I hit the big 55 in August and want to take out as much as i can given its tax free for now!

Am i able to take both lump sum amounts out?

Many thanks in advance.

robin61

The pension commencement lump sum for your DB scheme is tax free.

If you have a separate private scheme 25% of that can normally be taken as a PCLS as well. However the rest is classed as income whether you take it as an Annuity or as drawdown. So it will count towards the £11K per annum personal allowance you have before you pay tax.

LHW99

For final salary schemes it depends on the scheme rules, and is likely to be reduced if you take it before the scheme's normal retirement age

xylophone

Is 55 Scheme Normal Pension Age?

dunstonh

I hit the big 55 in August and want to take out as much as i can given its tax free for now!

So, you want to take it out of a tax free environment to bring it into a taxable one?
Can you access it without penalties at 55? (55 is early for most defined benefit schemes and you would expect a penalty).

londondealer

I'm thinking I need some advice and good advisors out there?

mania112

it's unlikely you'll be able to take the tax-free cash without also triggering the taxable income too, on the DB scheme.

jamesd

londondealer wrote: »

I am in a final pension salary scheme and my lump sum is going to be 70k.

You will find that you will not be allowed to take the tax free lump sum without also taking the income. It's usually a bad move to take anything out of a defined benefit pension before its noramal retirement age. Borrowing tends to be cheaper in part because the reduced income is for life while the borrowing interest is for less time.

For most defined benefit pensions it's also a bad idea to take a lump sum but there are some exceptions. Usually the commutation rate of lump sum to income given up is poor.

londondealer wrote: »

I also have another pension fund that i paid into separately and that total i can draw out will be 16k. I hit the big 55 in August and want to take out as much as i can given its tax free for now!

Assuming that this one is a money purchase pension, not another defined benefit pension it's fine to take out the tax free lump sum if you have a good use for the money. Bad uses would normally be things like paying off a mortgage.

Given that you'll be 55 soon you're in a great position to pay lots of money into a personal pension to maximise your tax gain.

bigfreddiel

dunstonh wrote: »

So, you want to take it out of a tax free environment to bring it into a taxable one?
Can you access it without penalties at 55? (55 is early for most defined benefit schemes and you would expect a penalty).

Don't the police force retire at 55?

In the civil service I think we lose 5% for each year early you take your pension, and by that I mean the Classic scheme, it's probably different now. fj