Partial DB transfer tax query

Gulfv

I'm considering a partial transfer out of around 33% of my DB pot based on a current CETV

My query is how is the 25% tax free aspect dealt with? (will it be only 25% of the amount transferred?) If so,as no further transfers will be allowed from the DB scheme, will I have to take further lump sums from the DB pension to take full advantage of the 25% tax free aspect?

MTIA

molerat

Are you sure you can do a partial transfer from your DB scheme ?

Any transfer into a DC pot will give you 25% of that pot available tax free.  Tax free elements from the DB pension will be according to the rules of the scheme and will likely mean bringing the whole pension into payment.

dunstonh

I'm considering a partial transfer out of around 33% of my DB pot based on a current CETV

Does the scheme allow that?

My query is how is the 25% tax free aspect dealt with? (will it be only 25% of the amount transferred?)

There is no 25% tax free on a DB scheme.   That only applies to DC schemes.        What is available in the DB scheme will be subject to the DB schemes rules.

Gulfv

Thanks....Yes, I've got written confirmation that a partial transfer is possible

xylophone

Are you sure you can do a partial transfer from your DB scheme ?

Possible but  apparently not  offered as an option  by the majority of schemes - discussed here.

https://www.lcp.uk.com/our-viewpoint/2019/10/partial-transfers-of-db-benefits-the-best-of-both-worlds/

https://www.royallondon.com/siteassets/site-docs/media-centre/policy-papers/partial-transfers-of-db-benefits-october-2019.pdf

xylophone

From RL link above

7. Guest case study – the Ford UK Pension Scheme

With many thanks to Oliver Payne, European Pensions Manager and Actuary, Ford Motor Company Ltd have kindly allowed us to include details of their partial transfer policy as a case study in this paper.

Marcon

Gulfv said:

I'm considering a partial transfer out of around 33% of my DB pot based on a current CETV

My query is how is the 25% tax free aspect dealt with? (will it be only 25% of the amount transferred?) If so,as no further transfers will be allowed from the DB scheme, will I have to take further lump sums from the DB pension to take full advantage of the 25% tax free aspect?

MTIA

If you make a partial transfer, think of it as two separate pensions (which is in truth what it becomes):

1. the part you transfer to a DC arrangement will have the usual 25% tax free lump sum 
2. the tax free cash in the DB scheme will be whatever the rules permit. Have a look at your scheme booklet, or ask the administrators how the maximum cash is calculated (what they won't be able to do is tell you ahead of time how much - it isn't a simple %age as with a DC scheme). You will only be able to take one tax free lump sum from your DB pension at the time you access your retirement benefits. If you've transferred part of your benefits to a DC scheme, the DB tax free cash will be lower.

Gulfv

Thanks Marcon......If I went ahead with this partial transfer I would rather not take any further lump sums from my remaining DB pension. As an alternative, I assume once the pension was in payment, I could choose to have a portion paid tax free? (subject to the normal limits etc)

xylophone

Have a look at the Ford example in the above.

Has your scheme produced  a detailed guide as to how the partial transfer will be administered?

What is your scheme's position regarding appropriate advice?

Marcon

Gulfv said:

Thanks Marcon......If I went ahead with this partial transfer I would rather not take any further lump sums from my remaining DB pension. As an alternative, I assume once the pension was in payment, I could choose to have a portion paid tax free? (subject to the normal limits etc)

Not from the DB scheme. You need to decide at the outset how much tax free cash you'll take from it (subject to the scheme rules). Part of the pension being paid might be tax free simply because you haven't used up your personal allowance in other directions.

If you don't initially take tax free cash from the DC part (or take less than 25%), then yes, when you make further withdrawals from the DC pot, some of it will be tax free.

Gulfv

The paperwork/admin required to complete the partial transfer is the same as a full transfer (including confirmation of appropriate independent  financial advice)