Defined Benefit Pension

jim8888

I have a DB pension and receive annual projections on what it's worth, depending upon when I take it. There is always an option to take a defined annual income or a lump sum with a reduced annual income. In the second scenario, I'd receive about 25k per year along with the lump sum. But I wondered if I HAVE to take the annual 25k income stipulated? If, alternatively, I only wanted to take £12,500 a year and pay no income tax while I topped up living expenses from the lump sum, could I do that?

xylophone

But I wondered if I HAVE to take the annual 25k income stipulated? If, alternatively, I only wanted to take £12,500 a year and pay no income tax while I topped up living expenses from the lump sum, could I do that?

No, once you claim your DB pension, you are limited to the options offered by your scheme.

You choose lump sum/monthly pension - the monthly pension will be paid (and escalated in payment as specified under legislation/scheme rules) and you pay tax as required according to your total income.

crv1963

I think it depends on your scheme rules, I believe that you will be stuck with the lump sum and 25k, in my scheme the TFLS is 3x the pension, then the annual pension or larger TFLS and a smaller pension.

The scheme is probably unable to reduce the pension for an individual.

Brynsam

jim8888 wrote: »

I have a DB pension and receive annual projections on what it's worth, depending upon when I take it. There is always an option to take a defined annual income or a lump sum with a reduced annual income. In the second scenario, I'd receive about 25k per year along with the lump sum. But I wondered if I HAVE to take the annual 25k income stipulated? If, alternatively, I only wanted to take £12,500 a year and pay no income tax while I topped up living expenses from the lump sum, could I do that?

Check with the scheme. It is likely you can take an amount of tax free cash somewhere between zero and the maximum permitted under your scheme rules. It's unlikely you can vary the amount of pension once in payment.

GunJack

You are talking about commutation of your pension to give extra lump sum, many db schemes do this BUT within set limits. You'd have to ask your scheme about this if you really want to, but it's not always good value to do so.

tacpot12

You could look at transferring your DB pension to a DC pension. This would give you more control over how you take the benefits, but at significant risk to the security of your income. Depending on the value of the DB pension, it might also cost you quite a bit to get the advice you will need in order to transfer it.