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Old DB Pension Quotation do not understand
martind187
Posts: 7 Forumite
Wife has a DB Pension from 1986 to 1991 now with Compass XPS Admin, She asked for a Quotation/Options for taking it at 55
Option 1 - All Pension £594 pa
Option 2 - Tax free cash and reduced pension ... Tax free £143.18 plus pension £588.12pa
Option 3 - lower tax free cash & reduced pension
Option 4 - Gross Trivial lump sum £22,825 (if HMRC allow it)
So why is option 2 tax free cash so low ? ... Shouldn't it be 25% of £22,825
and is the figure of £22,825 the Pension pot
Thanks in advance
Option 1 - All Pension £594 pa
Option 2 - Tax free cash and reduced pension ... Tax free £143.18 plus pension £588.12pa
Option 3 - lower tax free cash & reduced pension
Option 4 - Gross Trivial lump sum £22,825 (if HMRC allow it)
So why is option 2 tax free cash so low ? ... Shouldn't it be 25% of £22,825
and is the figure of £22,825 the Pension pot
Thanks in advance
0
Comments
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it is an FS so there is no pot to take 25% of. The fact that they would give £22,825 tio her to relieve themselves of the ongoing commitment to pay is a separate factI’m a Senior Forum Ambassador and I support the Forum Team on the Pensions, Annuities & Retirement Planning, Loans
& Credit Cards boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com.
All views are my own and not the official line of MoneySavingExpert.0 -
martind187 wrote: »Wife has a DB Pension from 1986 to 1991 now with Compass XPS Admin, She asked for a Quotation/Options for taking it at 55
Option 1 - All Pension £594 pa
Option 2 - Tax free cash and reduced pension ... Tax free £143.18 plus pension £588.12pa
Option 3 - lower tax free cash & reduced pension
Option 4 - Gross Trivial lump sum £22,825 (if HMRC allow it)
So why is option 2 tax free cash so low ? ... Shouldn't it be 25% of £22,825
and is the figure of £22,825 the Pension pot
Thanks in advance
It's because her GMP (the minimum pension that they must pay by law) is £588.12pa. Schemes are within their rights to limit tax free cash commutation when that would take the remaining pension below the GMP level.
What is her normal retirement age? - if it is 60 (or even 65) then the age 55 quote will have been reduced for early payment. If she leaves the pension until no reductions apply, then she'll be able to commute more (although still no guarantee that it will be 25%)
The trivial commutation offer is subject to the total of all of your wife's pension benefits (excluding the State pension) being below £30K. So, if she has another pension 'pot' out there of just over £7K then, no, HMRC won't permit it.
£22,825 isn't the 'pot' value as there is no 'pot'. It's just the trivial commutation calculation.0 -
Thanks for the replys ..... that explains a lot0
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