Offered 100% tax free lump sum.

alfmurph

I have been quoted 9k with 70k lump sum or 12k with 30 k lump sum on my defined contribution council pension . When i asked if i could take no lump sum and get more of a annual pension they said i must take at least the 30k . Is that correct .
AND
My wife has asked for a quote from her final salary private company pension and has only one option. 12k pension and 70k lump sum . 70 k lump sum is described as 100% tax free . How can they offer 100% tax free lump sum when i read that only 25% of lump sum is tax free .
Confused and need an explanation please .

Ganga

I pressume that her pension total must be £280000.00 as £70000.00 is 25% and unless she has a life threatening illness that is the most you can get tax fee,other will be along to confirm.

sheramber

The 25% tax free element is 25% of the total pension pot,

xylophone

I have been quoted 9k with 70k lump sum or 12k with 30 k lump sum on my defined contribution council pension .

Are you sure this is a DC pension?

You were not in LGPS?

alfmurph

It is a LGPS SCHEME for myself .
For my wife £280.000 is a dream . It is definately 70k .

liffy99_2

Local gov. Schemes are usually defined benefit I think. Just taken my NHS pension with an annual, index-linked payment and lump sum (tax free) of three times the annual pension payment. Same applied to my wife with her local council pension.

Silvertabby

I have been quoted 9k with 70k lump sum or 12k with 30 k lump sum on my defined contribution council pension . When i asked if i could take no lump sum and get more of a annual pension they said i must take at least the 30k . Is that correct .

Probably. You must have some pre 2008 service, which was 1/80th pension and an automatic lump sum of 3 x pension. Depending on when you joined the LGPS, you may have been offered the chance to stay on the old rules - ie, no 25% tax free cash but may give up some of your automatic lump sum in return for a bigger pension (inverse commutation). If you qualified, you would have been sent a letter and asked to confirm your wishes in writing by a specified date. From experience (retired LGPS administrator) I reckon that over 95% of these letters went straight into the recipent's bin. As your LGPS administrator has told you that you must take at least £30K, then you either joined too late or didn't respond to the letter.

My wife has asked for a quote from her final salary private company pension and has only one option. 12k pension and 70k lump sum . 70 k lump sum is described as 100% tax free . How can they offer 100% tax free lump sum when i read that only 25% of lump sum is tax free .
Confused and need an explanation please .

It isn't 25% of the lump sum that is tax free - it's 25% of the notional pension pot (subject to the commutation factor).

alfmurph

My wife's Quote.
full pension 15k per annum
or
11k per annun and 75k tax free cash.

alfmurph

Got it .
So if my wife's pot is 280k . She gets 70k tax free in her hand . She is only 61 so if you add on average life expectancy of say of 18 years making her 79 you then multiply 18 years by 12k making roughly 210k and add on the 70 k making the pot of 280k .
In my own case i have no recollection of receiving this letter but i would probably have settled for the 25% lump sum .
Thanks very much for explaining this everybody .

alfmurph

One more question .
My wife is planning on retiring next year at age 61 which is what the above quotes are based on . Obviously she will not receive oap until 66.
She has crohn's disease so if she applied for early retirement for health reasons would she be entitled to any more pension .
thanks again .

bigadaj

alfmurph wrote: »

One more question .
My wife is planning on retiring next year at age 61 which is what the above quotes are based on . Obviously she will not receive oap until 66.
She has crohn's disease so if she applied for early retirement for health reasons would she be entitled to any more pension .
thanks again .

Not sure why you'd expect more pension.

Ill health retirement, if approved, would normally just pay the pension earlier, often with no reduction due to taking it early but the latter is scheme dependent.

So best case if she applied would be she'd get the same pension a year earlier.