DB tax free lump sum

rjb101

I retire in a few months time with a defined benefit pension. I have been musing over whether to take the tax free lump sum or not. To help with my musing I've trying to find out if I don't take it have I lost the tax benefit? I have a DC pension which I already drawdown of which I have the first 25% of any withdraw tax free because I didn't take the lump sum. I haven't been able to find out if it's the same with a DB pension.

Albermarle

You will have one chance to take it or not . Normally you will be given two options. Lump sum tax free with reduced pension or no lump sum with full pension . Possible you might get a half way house between the two.
Once you decide which option to take then no going back .

rjb101

This I know. What I don't know is is the tax benefit lost if I don't take the initial lump sum.  

NottinghamKnight

What is the commutation rate on offer, that's the primary concern.

xylophone

This I know. What I don't know is is the tax benefit lost if I don't take the initial lump sum.  

If you forego the lump sum altogether, then clearly the whole of the pension is income and subject to income tax at the rate applicable in your circumstances.

Dazed_and_C0nfused

rjb101 said:

This I know. What I don't know is is the tax benefit lost if I don't take the initial lump sum.  

You are trying to invent something that doesn't exist.

You either take a tax free lump sum or not.

You may have a choice of the amount of the tax free lump sum but that is all.  For example £5,000 taxable pension and £15,000 TFLS or say £6,500 taxable pension and no TFLS.

Albermarle

rjb101 said:

This I know. What I don't know is is the tax benefit lost if I don't take the initial lump sum.  

Yes it is lost .

rjb101

Albermarle said:

rjb101 said:

This I know. What I don't know is is the tax benefit lost if I don't take the initial lump sum.  

Yes it is lost .

Thank you. 
I asked because that isn't the case with the DC SIPP I have. I take money out and the first 25% is tax free. The remaining 75% is then taxable income. This is because I didn't take the lump sum.
I can carry on musing now.

atush

Do find out if you can take a smaller TFLS that the full 25%, and ask/calculate the commutation rate.  Do you need a lump sum and what would you do with it? In general, unless you have poor health and wont make old bones, it is better to not take a TFLS from a DB pension.  But w/o further detail we cant have an opinion in your case.

Tealblue

atush said:

Do find out if you can take a smaller TFLS that the full 25%, and ask/calculate the commutation rate.  Do you need a lump sum and what would you do with it? In general, unless you have poor health and wont make old bones, it is better to not take a TFLS from a DB pension.  But w/o further detail we cant have an opinion in your case.

The maximum lump sum from a DB scheme isn't 25%. It's whatever the scheme rules permit, subject to HRMC limits.

Albermarle

rjb101 said:

Albermarle said:

rjb101 said:

This I know. What I don't know is is the tax benefit lost if I don't take the initial lump sum.  

Yes it is lost .

Thank you. 
I asked because that isn't the case with the DC SIPP I have. I take money out and the first 25% is tax free. The remaining 75% is then taxable income. This is because I didn't take the lump sum.
I can carry on musing now.

DC and DB schemes are totally different . In general DB schemes are much better to have .