DB membership and tax free lump sum

testertrev

Afternoon all


I am in the lucky position of having achieved 40+ years in a DB scheme and I also pay into the associated AVC scheme to improve scheme benefits. However my latest annual pension estimate shows that I have reached a level where I can only take a certain amount of my AVC as lump sum as I have reached the limit permitted. I suppose my question is that as I have no intention, need or desire to retire just yet what is the best way forward to maximise lump sum rather than have the excess converted to pension which, ultimately, would be payable for a shorter time?


Hope the question makes sense

kidmugsy

Are you allowed to transfer part of the AVC money out into a personal pension of some sort?

testertrev

No against scheme rules

System

Presumably, the limit is being able to take take 25% of the notional pension pot tax free rather than as taxed pension income. You can either reduce (or stop) AVC contributions to keep below the limit, or accept that you will have to take some of the AVC as taxed pension income (the benefits of this would depend upon your tax rates in employment and when retired).

testertrev

Currently HR tax payer but looking to be BR in retirement!

System

testertrev wrote: »

Currently HR tax payer but looking to be BR in retirement!

Then, it is well worth making AVC contributions as you get tax relief at 40% and when you retire you can take 25% tax free and pay 20% tax on the additional pension.

kidmugsy

testertrev wrote: »

No against scheme rules

Would it be possible to do such a transfer after starting the DB pension and using up part of the AVCs for a TFLS? In other words, could you transfer unused AVCs that are left orphaned?

If not I suspect that Economic's recent suggestion may be your best policy. Or you could stop paying AVCs and instead accumulate money in a personal pension of some sort, perhaps even with a view to your widow using that after your death, or your using it to bridge a gap before State Retirement Pension begins.

Albermarle

If you are anywhere near the lifetime allowance for pensions ( that would include the DN+B scheme and any others you might have ) then it could be better just to invest any new money into other investments /savings accounts rather than into a pension.

cloud_dog

Or LISA, if available.