GMP Options above LTA

Wattstheanswer

I have an old pension with a previous employer I left 35 years ago. It pays a GMP when I am 65.  I am over the LTA with my current employers pension .  I have asked what my options are with the 35 year old pension. Which will in excess of my LTA  The administrators have said 
1. I can only take this as a pension which will be taxed at 25% at source plus my marginal rate of tax. They said I cannot take this excess above LTA as cash taxed at 55% but have not said why I cannot do this. Does anyone know why this might be?
2. Because I am 63 they have provided a pension quote for retirement now and have said there will be a step up at 65 to the GMP.   They have said there is no increase to the GMP going forward and also no decrease in GMP at 65 for taking the pension early.   Does this make sense as it seems there is no downside to taking the pension now as it steps up to GMP at 65 with no reduction...so why wait till 65?
Does anyone have any thoughts on this? 

3. They have provided a cash option if retire early ie now for the pension which is over LTA taxed at 55%. But have not said what then happens at 65 with GMP...again anyone have any thoughts on what I should be asking them?

many thanks 

jamesd

1. it's what the combination of law and scheme rules says. GMP is income like a drawdown pot so gets 25% instead of 55% LTA charge. Unlike AVCs it's part of the main pension and not transferrable except with the rest.

2. the details of benefits can make this sort of thing happen.

3. might or might not be a CETV amount. Vital that you find out because a CETV tends to  much more than other types of lump sum. Assuming it's above £30k you must get regulated financial advice first then can transfer to a personal pension.

From a personal pension you can make any part  as lump sum with 55% LTA charge and any part into drawdown with 25% charge but subject to income tax when taken. The 55% rate is equivalent to 40% income tax so if you have basic rate range left and don't need all as a lump the 25% and drawdown route can be cheaper. Death benefits of 25% and drawdown are normally better. Not part of your estate and if you die before age 75 your beneficiaries can draw on it tax free. From 75 it's taxed as income as they take it, with a toddler potentially getting out their income tax allowance out free of tax for 18+ years.

Wattstheanswer

Many thanks jamesd
re point 3 it is not the cetv amount it is simply a cash lump sum amount and a reduced pension    However I am over the lta so don’t think they have taken this into account . 

They have said that as my pension is all GMP at 65 that it has to be taken as pension same as your reply .

however they also have said that I can take a  pension now at 63 versus normal retirement date of the plan at 65 ...and at 65 it will be increased to the GMP....this seems to imply I should take the pension now as it will be increased to GMP at 65 regardless ...so no advantage to not taking it as GMP amount at 65 does not change either way.   Does this make sense?
Many thanks