DB pension lump sum . 80k .

alfmurph

If i take 25% of my lump sum when i retire does the other 75% stay invested in my lgps .
If so do i receive interest annually and at what percentage .
Would withdrawing money work like this .
80K lump sum - take out 20k first year .25%tax free .
60k left - take out 15k second year . 25% tax free .
45k left - take out 11250k third year . 25% tax free .
etc .
If i leave the full 80k lump sum in lgps and withdraw only small amounts as needed how do i know i am receiving good deal .

Dazed_and_confused

As a general rule pensions don't pay interest.

Are you in a defined benefit scheme with LPGS?

If so you have nothing "invested".

And cannot withdraw money when you want as there is no pot to withdraw from.

daveyjp

With LGPS once you retire you get paid out in full.

The lump sum is all tax free.

zagubov

if it's similar to other public sector DB pensions, your lump sum doesn't increase if you delay taking parts of it.

The rest of your pension isn't a precise pot of money, that you personally own, invested anywhere.

It's increased with inflation, and will be partly inheritable by spouses/dependant children.

Apart from your lump sum, your pension will be taxable as if it was ordinary income.

It's a very good deal, comes with a certain security, and would be envied by many.

daveyjp

LGPS pension contributions are invested, value is almost £300bn.

Thrugelmir

daveyjp wrote: »

LGPS pension contributions are invested, value is almost £300bn.

With a funding level of 85% at the last financial year end. Corbyn's proposed raid on UK business appears affordable. At least in the short term.

Dazed_and_confused

LGPS pension contributions are invested, value is almost £300bn.

True, but that is irrelevant in the context of what the op is asking about.

Paul_Herring

80K lump sum - take out 20k first year .25%tax free .
60k left - take out 15k second year . 25% tax free

No. You can only take the 25% PCLS once, not once per year. The remaining 75% is taxable.

Silvertabby

alfmurph wrote: »

If i take 25% of my lump sum when i retire does the other 75% stay invested in my lgps .
If so do i receive interest annually and at what percentage .
Would withdrawing money work like this .
80K lump sum - take out 20k first year .25%tax free .
60k left - take out 15k second year . 25% tax free .
45k left - take out 11250k third year . 25% tax free .
etc .
If i leave the full 80k lump sum in lgps and withdraw only small amounts as needed how do i know i am receiving good deal .

In the case of the LGPS (and other DB schemes) it's all or nothing. (A one-off lump sum, plus an annual index linked pension for life). You can't dip in and out at will, as you only have once choice on how to take your benefits.

The 25% tax free sum isn't automatic - it's just the maximum allowed by HMRC. However, if you do go down this route then your actual tax free lump sum/reduced annual pension will be determined by the scheme's commutation rate. Which in the case of the LGPS is a less than generous 1:12 (ie, you give up £1 of annual pension - for life - in return for £12 tax free cash).

Your pre 2008 service, if any, includes an automatic lump sum of 3 x annual pension. Post 2008 service has a higher accrual rate, but no automatic lump sum.

The following calculator may be of some help:

How much lump sum would you like to take?

sammyjammy

Paul_Herring wrote: »

No. You can only take the 25% PCLS once, not once per year. The remaining 75% is taxable.

Incorrect, LGPS is a defined benefit scheme, all of the lump sum is tax free.

Dox

sammyjammy wrote: »

Incorrect, LGPS is a defined benefit scheme, all of the lump sum is tax free.

The PCLS is tax free, the pension is taxable. Not sure why you're confused unless you haven't registered what a PCLS is? If so, read Silvertabby's extremely helpful post above.