DB Pension and AVC Tax free cash

BPL

So my pension handbook says i can take (DB annual benefit x20 + AVC)x 25% Tax free cash.

 I make all my plans and tell them i want max tax free cash taken from the AVC and transfer the residual to my SIPP after.

3 weeks before pension payment and my 60th birthday i get told no you have to transfer out the residual first. I reluctantly estimated the amount and went out of the market in the AVC to cash which is transferred to my SIPP.

All well and good but then 3 days before my 60th birthday a guy phones up and says oh no you can now only have DB annual benefit x 20 x 33.333% tax free cash from the AVC as you don't want scheme benefit purchsse. So i get £30k less TFC with the second residual transferred to my SIPP.

Needless to say i disagree and they have only pointed me at the finance act which is 70 pages long legalese.

This is now in stalemate and being ironically investigated by my employer funded financial advisor.

Can anyone make any sense of this long tale of woe? It's left a nasty taste in my mouth after lifelong service with my employer?
TIA sorry its a long read.....

AlanP_2

Is this the Local Gov scheme as that works in the way you first indicated?

Take AVC as 25% as per your formula with any residue used to buy additional scheme annual pension or transferred out to a SIPP as a crystallised amount i.e. no more TFLS can be taken.

Don't know anybody who has had a surplus TBH so not sure how that works in reality.

@Silvertabby might be able to comment?

BPL

It's similar to lgps and also public sector. If i add the DBx20/3 figure to the residual AVC amount transferred uncrystalised to my SIPP it's roughly the same as (DBx20+AVC)x25%. I didn't know you could transfer a crystallised DC benefit to a SIPP. The administration are very poor communcators and use the we know best but we're not going tell you how strategy. Was wondering who my next port of call would be?

OldBeanz

BPL said:

It's similar to lgps and also public sector. If i add the DBx20/3 figure to the residual AVC amount transferred uncrystalised to my SIPP it's roughly the same as (DBx20+AVC)x25%. I didn't know you could transfer a crystallised DC benefit to a SIPP. The administration are very poor communcators and use the we know best but we're not going tell you how strategy. Was wondering who my next port of call would be?

Do you not have any paperwork which explains the options? The LGPS publishes the options online and I would expect you would have been given similar at some stage in the process.
I must admit I had worked out the TFLS using the /3 rather than 25% method for many a year and was happy to expect a few £k more by using the latter.

BPL

All i have is (DBx20+AVC)x25% from the staff handbook a vague email ir 2 about transferring crystallised benefits etc i can't have all the tfc and the 70 page finance act

Silvertabby

I've never heard of such a thing as transferring out the AVC 'excess' before the final retirement calculation is done. 

Your main pension fund can only pay you the maximum allowed by HMRC - as you say, 25% of 20 X annual pension plus 1 X AVC fund.  However, the actual payment calculation must then have been based on 20 X annual pension plus 1 X the AVC still in your 'pot'. 

The Finance Act only refers to HMRC regulations, not individual pension scheme procedures, and so isn't likely to be of help.

Can you post the name of your pension scheme?  One of us may then be able to dig something out for you to use.

BPL

I was told i would have to transfer out what would have been the excess as this was the new way of doing things. Apparently people had been taking max? TFC and leaving the excess in the AVC for ages after. I did this as they said then i was told oh no you can't have more than DB/3 so despite saying i couldn't have the 2nd excess transferred they did just that. I could maybe pm the scheme info.

Silvertabby

BPL said:

I was told i would have to transfer out what would have been the excess as this was the new way of doing things. Apparently people had been taking max? TFC and leaving the excess in the AVC for ages after. I did this as they said then i was told oh no you can't have more than DB/3 so despite saying i couldn't have the 2nd excess transferred they did just that. I could maybe pm the scheme info.

That's fine.  I may not be able to access all of the scheme info but I'll have a go.

BPL

Thanks much appreciated. 
Interestingly,
Actual TFC=(DBx20+Actual TFC)X25% = DBx20 /3
Supposedly I'll get the missing TFC when i crystallise the SIPP and if you add these to together i think it makes the original Max TFC amount. It's me who worked this out. They couldn't really tell me how they worked it out. It's in the computer system blah blah. Still it is not what's in the staff handbook.

OldBeanz

So  DBx20 /3 is the best way to work this out or do we think that this would be different if re-investing into the scheme i.e TFC=(DBX20+AVC)/4 with remainder buying extra pension (assuming overshoot).

BPL

My AVC was larger than the TFC however calculated. I was forced into estimating the TFC residual at short notice and getting out of the market. Then they changed the calculation method but still transferred the second residual to my SIPP. I always told them i didn't want scheme pension.