PCLS Options Questions

shinytop

Apologies for the long post.



I have a combined DB/AVC/DC pension. I wanted to find out my options for PCLS and the only way to do that was to ask for an early retirement quote, which I now have. I won’t be taking it but I’m assuming the principles and calculations will be the same when I do retire.

I have 2 illustrations, both for November 2018 retirement. (1) is no PCLS and (2) is the minimum PCLS from the DB plus maximum from the DC/AVC. (1) is as expected; an actuarially reduced DB plus a combined DC/AVC figure. There are several options for the DC/AVC as expected (annuity, defer, transfer to another provider, etc.).

(2) is where I have some questions. The scheme rules say if I want to use my DC/AVC as part of a PCLS then I have to take the minimum PCLS from the DB. The total PCLS has been calculated as 0.25x(DC/AVC + 20xDB) – they don’t actually say this but I’ve done this calculation and it’s spot on. This PCLS made of the minimum from the DB (which is stated) and an amount from the DC/AVC (also stated). The amount from the DC/AVC is about 40% of it and the amount from the DB is at a 21x commutation using the DB reduction. This looks to be quite an attractive option, even if I didn’t really need the PCLS from the DB. 21x isn’t too bad (before tax) and 40% TF is more than I’d get otherwise. Does that sound right?

My other question is that under option (2) my choices with what I can do with the remaining DC/AVC are stated as less; it says I can only purchase an annuity or take as a taxable lump sum. I understand why these two choices are there and what they are but why can’t I transfer to another provider and draw down later and pay tax as and when? Can my provider stop me or is it some other rule I'm not aware of?

This may be academic anyway because the most likely scenario is that I’ll leave work next year, transfer the DC/AVC somewhere else and live off some of that for 18 months or so until NRA for my DB.

Dox

shinytop wrote: »

My other question is that under option (2) my choices with what I can do with the remaining DC/AVC are stated as less; it says I can only purchase an annuity or take as a taxable lump sum. I understand why these two choices are there and what they are but why can’t I transfer to another provider and draw down later and pay tax as and when? Can my provider stop me or is it some other rule I'm not aware of?

You can transfer all your AVCs, but what you can't do is take some of your AVCs as part of a PCLS because that counts as drawing your benefits and you can't transfer at all once your benefits are in payment.

kidmugsy

Would I be right to assume that if the OP took the DB/AVC combo as described in his Option (2) then his future pension contributions would be limited to £4k p.a.?

(Not that it would matter, judging by his present intentions.)

shinytop

You can transfer all your AVCs, but what you can't do is take some of your AVCs as part of a PCLS because that counts as drawing your benefits and you can't transfer at all once your benefits are in payment.

That explains the reduced options, thanks.

Would I be right to assume that if the OP took the DB/AVC combo as described in his Option (2) then his future pension contributions would be limited to £4k p.a.?

Hmm, not sure but no it wouldn't matter anyway as I'm not going to be paying into a pension after I stop work. As I said I think my most likely option is to transfer the DC/AVC when I leave and take any TFLS I need from that and then take the DB at NRA with or (most likely) without, a PCLS.

marlot

Dox wrote: »

You can transfer all your AVCs, but what you can't do is take some of your AVCs as part of a PCLS because that counts as drawing your benefits and you can't transfer at all once your benefits are in payment.

It must depend on how the pension rules are defined, because I seem to be offered that option on my DB/AVC pension.


I've put the forms in, so will need to see what happens, but I'm told that the remainder of the AVC is uncrystalised and can be transferred.


I guess I'll find out for sure over the next few weeks as I try to enact it!