DB pension. Can I take 25% lump sum plus this years personal allowance (no income) all tax free?

Frances63

DB pension. Can I take 25% lump sum plus this years personal allowance (no income) all tax free? At least as far as HMRC is concerned?

Dazed_and_C0nfused

You don't "take" anything from a DB pension, you will get whatever the scheme rules allow.

Subject to any adjustment for extra lump sum, inverse commutation etc.

xylophone

DB pension. Can I take 25% lump sum plus this years personal allowance (no income) all tax free? At least as far as HMRC is concerned?

Do you mean that you are not working and so have no salary?

You are just about to claim your DB pension?

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/defined-benefit-or-final-salary-pensions-schemes-explained

You will receive a tax free pension commencement lump sum and then a monthly pension?

The annual amount of your pension will be less than your personal allowance?

You will have no income at all other than your pension?

Pat38493

Frances63 said:

DB pension. Can I take 25% lump sum plus this years personal allowance (no income) all tax free? At least as far as HMRC is concerned?

If it is a DB pension that you are claiming, most likely they will offer you (either by option or compulsory) a lump sum which will be tax free.

The actual pension amount you get will then be determined by the amount of time you have in the scheme, so you wouldn't normally have any control over whether to take out only your tax free allowance or more.  

But if the pension amount per year that you get is less than your annual personal allowance (also including any other income like state pension), then yes it would also be "tax free".

dunstonh

DB pension. Can I take 25% lump sum plus this years personal allowance (no income) all tax free?

There is no 25% lump sum with DB schemes.  They get a pension commencement lump sum that is based on the terms of the scheme.

You cannot access a DB scheme flexibly.

Frances63

There is a slider graph on the DB pension website that allows you to choose how much you want as a lump sum and what the remainder will be as monthly income, so our scheme is indeed flexible and we are free to compare and decide. 
I also have a DC pension which is linked (it took over when the DB scheme was stopped - same company). I am allowed to take what I want from this second scheme as a lump sum also, and for a limited period the remainder can go into the DB scheme.

My question really was not about that as I know the score there. But more about the tax implication.

I have earned nothing since May, but had a contrbutions based job-seekers allowance (78 pounds a week) for a limited period. So I have plenty of personal tax allowance left for this current year. 
So
a) Can any lump sum over and above the tax free 25% allowed be put towards my personal tax free allowance?
b) Will I nave to pay back any of the contributions based  job-seekers allowance (it only amounted to about 900 pounds in total)?

So this tax year I have had very little income so far (480 pounds in April from last job) and have lived off savings.

I will shortly be turning 55 years old so then will have access to both schemes.

Frances63

xylophone said:

You will receive a tax free pension commencement lump sum and then a monthly pension?

The annual amount of your pension will be less than your personal allowance?

You will have no income at all other than your pension?

Hi, 

yes commencement lump sum of up to 25% in the DB scheme and whatever I want in addition from a DC scheme

Yes the annual amount will be about 9,500 pounds, (792 pounds per month), but as I can't take it before January, that will leave a lot of spare personal tax allowance for this tax year to April 5th/6th

Yes, no other income at all apart from pension

xylophone

The PCLS is tax free.

You have a personal allowance which can be set against earnings/taxable benefit/pension income for the tax year 22/23.

What is your situation regarding savings income (interest/dividends) outside tax privileged accounts like ISAs?

https://www.gov.uk/income-tax-rates

https://www.gov.uk/income-tax/taxfree-and-taxable-state-benefits

https://www.gov.uk/apply-tax-free-interest-on-savings

https://www.gov.uk/topic/personal-tax/savings-investment-tax

Frances63

xylophone said:

The PCLS is tax free.

You have a personal allowance which can be set against earnings/taxable benefit/pension income for the tax year 22/23.

What is your situation regarding savings income (interest/dividends) outside tax privileged accounts like ISAs?

Not enough savings interest to be near anywhere near the 1,000 pounds allowance.

Dazed_and_C0nfused

Frances63 said:

xylophone said:

The PCLS is tax free.

You have a personal allowance which can be set against earnings/taxable benefit/pension income for the tax year 22/23.

What is your situation regarding savings income (interest/dividends) outside tax privileged accounts like ISAs?

Not enough savings interest to be near anywhere near the 1,000 pounds allowance.

From what you've posted you're not going to be able to benefit from the savings nil rate band (aka Personal Savings Allowance).

You have to have used your Personal Allowance and the savings starter rate band (0% tax rate) before you can use the savings nil rate.

And if your non savings non dividend income i.e. JSA, earnings, pension income only uses up your Personal Allowance then you will have the full £5,000 savings starter rate band to use before the savings nil rate band can be used.

NannaH

You would have to account for your JSA within your personal allowance so would that plus whatever your pension income is, amount to more than £12570? 

Given that it’s only 5 months to the end of this tax year, it seems unlikely.