25% Tax Free

mgdavid

Duffers57 wrote: »

.........
Hi no I’m not receiving my state pension,

That wasn't the question! Have you obtained a State Pension statement? i.e. do you know exactly how much you will get at SPA, and do you know if you are making the best of the transitional arrangements between the old and the new State schemes?


https://www.gov.uk/check-state-pension

xylophone

called them to find them most rude on the phone

Did you complain about this? It is not acceptable.

Duffers57

I will double check online ref pension statement.......... not eligible for another 10 years unfortunately though. I would like my full 25 % now to go towards paying off my mortgage so I can enjoy my life!

xylophone

I will double check online ref pension statement.......... not eligible for another 10 years unfortunately though.

The statement will show you your position with regard to the new state pension.

The booklet is not very informative about how a PCLS is calculated - come back when WTW have clarified.

Duffers57

Just been to look online at my State Pension forecast- based on NI record to the 5th April 2018 - £154.20 per week if I make another 3yrs NI contributions the pension forcast -£164.35 a week from my retirement date of 15 September 2028

Duffers57

Sainsbury's Pension Scheme
Thank you for your email regarding your maximum tax-free cash.
I can confirm that the statutory maximum tax-free cash for your benefits is calculated in the following way:
(Option 1 pension x Commutation Factor) / (0.15 x Commutation factor + 1) = Max. tax-free cash With regards to your benefits, this is as follows:
(5327.01 x 19.275) / (0.15 x 19.275 + 1) = £26386.92
Please see the Cash Commutation Factors below to see where we got the Commutation Factor from: Cash Commutation Factors
The transfer value of £178,485.14 is the actuarial value of all of your benefits in the Scheme including the attaching spouse’s pension. This value is subject to market fluctuation and is not used to calculate your benefits in the Scheme.
Hopefully this clears up your query about the maximum tax-free cash you are entitled to.
Age 55
20.0
Age 61
18.2
Age 56
19.7
Age 62
17.9
Age 57
19.4
Age 63
17.6
Age 58
19.1
Age 64
17.3
Age 59
18.8
Age 65
17.0
Age 60
18.5

Silvertabby

Duffers57 wrote: »

Sainsbury's Pension Scheme
Thank you for your email regarding your maximum tax-free cash.
I can confirm that the statutory maximum tax-free cash for your benefits is calculated in the following way:
(Option 1 pension x Commutation Factor) / (0.15 x Commutation factor + 1) = Max. tax-free cash With regards to your benefits, this is as follows:
(5327.01 x 19.275) / (0.15 x 19.275 + 1) = £26386.92
Please see the Cash Commutation Factors below to see where we got the Commutation Factor from: Cash Commutation Factors
The transfer value of £178,485.14 is the actuarial value of all of your benefits in the Scheme including the attaching spouse’s pension. This value is subject to market fluctuation and is not used to calculate your benefits in the Scheme.
Hopefully this clears up your query about the maximum tax-free cash you are entitled to.
Age 55
20.0
Age 61
18.2
Age 56
19.7
Age 62
17.9
Age 57
19.4
Age 63
17.6
Age 58
19.1
Age 64
17.3
Age 59
18.8
Age 65
17.0
Age 60
18.5

That makes more sense - you originally quoted your annual pension as £3958.11, but that must have been its value at your date of leaving, with £5327.01 being the current value. (See ADD below).

£178,485.14 will be your CETV, which is the amount available for transfer to another pension scheme, should you wish to go down that route. There is no link between a DB CETV and the amount of tax free cash available should you not transfer.

The notional value of a DB pension for maximum tax free cash/LTA purposes is 20 x the annual pension plus any automatic lump sum. So, in your case, that's 20 x £5327.01 = £106,540.20 x 25% = £26,635.05 = maximum tax free cash allowed by HMRC regulations. However, the actual amount of tax free cash (and the amount of pension given up) is then determined by the pension scheme commutation rate. Your (age sensitive) commutation rate of 1:19.275 is certainly more generous than the public sector across-the-board 1:12.

ADD: Just seen where your pension figure of £3,958.11 came from. Taking the maximum tax free cash of £26,386.92 would reduce your original pension of £5,327.01 thus:

£26,386.92 / 19.275 = £1,368.97 annual pension given up.

£5,327.01 - £1,368.97 = £3,958.04

Revised notional value for max cash purposes:

20 x £3,958.04 = £79,160.80
Plus 1 x £26,386.92 = £105,547.72 x 25% = £26,386.93

Duffers57

Silvertabby, many thanks for your reply. It does seem a lot clearer now. I didn't understand that the rules on taking 25% tax free on a DB scheme is so different to a DC scheme and that there was such a thing as a Commutation Factor.

When my husband took his 25% tax free from his DB scheme, his potential pension was a lot higher and therefore came closer to 25% of his CETV.

I can't say that I understand the calculations fully, i.e. where (0.15 x 19.275 + 1) comes from or why the commutation factor reduces as you get older, but your reply has been most helpful.

Silvertabby

Duffers57 wrote: »

Silvertabby, many thanks for your reply. It does seem a lot clearer now. I didn't understand that the rules on taking 25% tax free on a DB scheme is so different to a DC scheme and that there was such a thing as a Commutation Factor.

When my husband took his 25% tax free from his DB scheme, his potential pension was a lot higher and therefore came closer to 25% of his CETV.

I can't say that I understand the calculations fully, i.e. where (0.15 x 19.275 + 1) comes from or why the commutation factor reduces as you get older, but your reply has been most helpful.

These calculations are the official way of working things out (which is why there are a few pennies difference in my figures and theirs) - but they have no place in letters to fund members who may not have a pensions background. Not all pension schemes use age sensitive commutation factors - the public sector certainly doesn't - but it's just the way Sainsbury's have decided to operate.