USS - General discussion

MarlowMallard

https://forums.moneysavingexpert.com/discussion/comment/81875726#Comment_81875726

Yes the 3x pension plus any extra lump out of the Inv Builder counts towards the 268k. Basically any "tax free" amount from a pension counts towards the 268k. Income below the 12.5k personal allowance is "taxable" but taxed at 0% and does not count towards 268k.

MarlowMallard

From above:

" I would like to understand clearly then i can make decision whether putting more volunteer contribution into my DC pot even over the 3.667 times annual DB projection (to be able to take the whole DC pot out in the tax free lumpsum). Or is it still beneficial to put in over that amount. My current situation: I only put what's over to the 40% tax bracket into the DC now. If I put more than this amount into the DC pot, it will be from my gross pay which is in the 20% tax bracket. Then when drawing down, say I still have a proportion (equal £268,275 - the amount of my tax free lumpsum, say £200K = about £68K) that has 25% tax free allowance. "

If you take 200k at start of pension, you have 68k tax-free lumps allowance left, so you could still have up to 4 x 68k = 272k left in the Inv Builder before you would run into the 268k limit.

LL_USS

https://forums.moneysavingexpert.com/discussion/comment/81875726#Comment_81875726

I believe this 268K allowance already include 3 times the defined benefit plus defined contribution

LL_USS

https://forums.moneysavingexpert.com/discussion/comment/81875810#Comment_81875810

Thank you @MarlowMallard
okay, assuming that I will have a DC pot quite big, say £272K left after having had a part of it taken out in the Pension Commencement Lumps sum of £200K, I can still have 68K in this DC pot (25% of it) as tax free (within the threshold) and I will need to pay appropriate tax when drawing down the rest of the pot. Somehow looking at the issue this way (having "up to 4 x 68k = 272k left in the Inv Builder before you would run into the 268k limit") makes it quite a substantial allowance.
My colleague in the example only has £18K tax free allowance left (as he has already taken a TFLS of about 250K).

MarlowMallard

https://forums.moneysavingexpert.com/discussion/comment/81876461#Comment_81876461

Yes that sounds correct. This assumes your annual pension is £30k or more, so the £200k PCLS is not more than 6.66x your annual pension, in which case whatever is left in the Inv Builder is uncrystallised so you can take 25% tax free later up to £68k limit. If the pension were less than £30k and the IB is large, you would have to crystallise some of the IB to boost 6.66x pension up to £200k… or you could reverse-commute the 3x lump sum to get a larger pension, then take 6.66x that all from the IB leaving the rest uncrystallised.

LL_USS

https://forums.moneysavingexpert.com/discussion/comment/81876575#Comment_81876575

Thank you so much @MarlowMallard - I am quite slow but I am gradully clearer about this. Thank you for your explanations for both scenarios. Food for thought for me going forward regarding how much to put further into the IB pot.