Could I cash in final my final salary pension

jimi_man

ypudding wrote: »

The other thing I'm starting to wonder about is the tax implications. IF I do go ahead with the CETV, transfer into a DC scheme (or drawdown that's another thing) I obviously cannot touch the money until I'm 55. Therefore will still be working as a payee. Would the inland revenue allow me to have a big pot of money destined for a DC scheme i cannot touch for 5yrs without them wanting a slice of the action?

Pensions are taxed on the way out, not on the way in.

ypudding

AlanP wrote: »

Yes, but be aware of Lifetime Allowance implications as DB schemes are "valued" more generously than the pure £value in a DC scheme.

I don't understand. The lifetime allowance is currently £1,055,000

JoeCrystal

ypudding wrote: »

I don't understand. The lifetime allowance is currently £1,055,000

The Pensions Advisory Service highlighted,
If you're a member of a defined benefit pension scheme, the value of your benefits is calculated as 20x the pension that you have accrued under the scheme plus any tax-free cash that you received.

If you’re a member of a defined contribution pension scheme, the value of your benefits is the value of your pension pot in that scheme.

For simplicity's sake, I am not assuming lump sum payout.

DC pension scheme: Got £1 million in the pension scheme, decided to get an index-linked annuity at 65, that would be £32,730 per year.

DB pension scheme: Got a pension income of £50,000 per year, that would be worth £1,000,000. In other words, a DB pension scheme is treated a third more generous than the DC pension scheme.

jimi_man

ypudding wrote: »

I don't understand. The lifetime allowance is currently £1,055,000

Yes it is. But as AlanP says, DB and DC pensions are valued differently. Currently your DB pension is valued (for the purpose of LTA) by multiplying your pension by 20 and adding any lump sum. The fact that you can take it at 50, that it is index linked etc, bears no relation to the valuation. So based on your figures, it isn't a problem.

However the CETV does take these things into account and consequently it could quite easily be over £1,055,000 with what you've described to us thus far. Another poster on here has been offered £1.7 million for a £26K pension that he can take at 50 with RPI index linking.

happyandcontented

Is it likely that a CETV will rise the nearer to the scheme retirement age or is that not a factor at all?

sandsy

happyandcontented wrote: »

Is it likely that a CETV will rise the nearer to the scheme retirement age or is that not a factor at all?

If all the assumptions stayed the same, the CETV will normally go up as you get nearer to scheme retirement age.

But as soon as the trustees start using different assumptions, you have no idea what will happen. If interest rates rise, it will probably go down. If mortality improves, it will probably go up. If inflation goes up, it will probably go up. Who knows?