PCLS - All £268,275 from One of Two Pensions?

dodmwe

I will kept to rounded numbers to keep things simple, but the numbers are not too far from my current situation.

I have a DB scheme that I can access unreduced at 60, and has a pension equivalent to £50k pa.

I also have a DC scheme that has £268,275. So my total pension pot is £1,268,275 equivalent. It means I can take a maximum PCLS limited to £268,275.

If I crystallise both pensions am I allowed to draw the maximum £268,275 solely from the DC pension (i.e. 100% of the DC fund) as PCLS, and draw the DB as 100% income? Or is it a maximum of 25% per pension, so I could only take £68,069 from the DC as cash, and I would have to convert some of my DB to cash.

I would prefer to selectively maximise my PCLS from my DC, and use my DB for income only, given a DB grows with inflation with less risk.

Thanks in advance.

Dazed_and_C0nfused

dodmwe said:

I will kept to rounded numbers to keep things simple, but the numbers are not too far from my current situation.

I have a DB scheme that I can access unreduced at 60, and has a pension equivalent to £50k pa.

I also have a DC scheme that has £268,275. So my total pension pot is £1,268,275 equivalent. It means I can take a maximum PCLS limited to £268,275.

If I crystallise both pensions am I allowed to draw the maximum £268,275 solely from the DC pension (i.e. 100% of the DC fund) as PCLS, and draw the DB as 100% income? Or is it a maximum of 25% per pension, so I could only take £68,069 from the DC as cash, and I would have to convert some of my DB to cash.

I would prefer to selectively maximise my PCLS from my DC, and use my DB for income only, given a DB grows with inflation with less risk.

Thanks in advance.

Is your DC pension linked to your DB pension in such a way that the DB value is relevant for TFLS purposes?

With most schemes it isn't, LGPS seems to be the most frequently mentioned scheme where it does apply.

As a general rule there is no tax free 25% with a DB scheme, the tax free PCLS amount is based on the scheme rules.

dodmwe

No, the DB and DC are not linked at all. The DC is an Aviva personal pension I have paid into over time.

Therefore, can I take the whole £268,275 from the Aviva pension as PCLS, even though that represents 100% of that particular  fund? And not commutate any of the DB and take it purely as income?

Linton

Generally the tax free lump sum can only be taken from the corresponding pension. You cannot take one pension’s TFLS from a different pension.

The one exception provided by some DB pensions is that you can take the DB TFLS from the associated AVC. But I guess your DC pension is not linked in this way to your DB pension.

I think the rules do not prevent sharing of TFLSs but no-one supports it. The admin and coordination between the separate schemes could be a serious problem.

Dazed_and_C0nfused

No, the two pensions are separate as far as tax free cash is concerned

You can take 25% TFLS from the DC pot.

green.lander_2

I have a very similar situation to dodmwe, the simple question is can the maximum tax free (£268,275) be taken from a separate DC Scheme (or number of) or is it limited to 25% of DC Scheme?

NoMore

Dazed_and C0nfused post immediately before yours answers you

green.lander_2 said:

I have a very similar situation to dodmwe, the simple question is can the maximum tax free (£268,275) be taken from a separate DC Scheme (or number of) or is it limited to 25% of DC Scheme?

dodmwe

Dazed_and_C0nfused said:

No, the two pensions are separate as far as tax free cash is concerned

You can take 25% TFLS from the DC pot.

Thank you. That is disappointing as I would prefer not to commutate any TFLS from my DB scheme. So, it will limit me to a £68,069 TFLS.

But, maybe there is something else I can try? My employers DB pension scheme was stopped 2 years ago. I decided to not make any more contributions to the new DC pension given the restrictive LTA. However, since the LTA has been abolished, I will start next month contributing to my employers new DC scheme, operated by Aegeon.

I can then transfer my personal pension from Aviva to Aegeon who operate my employers scheme. Is it possible that even though even though the employer DB and employer DC are separate schemes, they fall under my employers umbrella, and therefore may be more flexible on TFLS, or am I clutching at straws? 

dunstonh

I can then transfer my personal pension from Aviva to Aegeon who operate my employers scheme. Is it possible that even though even though the employer DB and employer DC are separate schemes, they fall under my employers umbrella, and therefore may be more flexible on TFLS, or am I clutching at straws? 

Clutching at straws.

The majority of DB schemes dont allow PCLS to be paid from linked DC schemes to begin with and where they do, it is in the linked AVC or legacy DC scheme.      Where it is a closed DB scheme with an unrelated master trust pension (which most Aegon workplace pensions are), then there is no link between the schemes.

You can ask the question but expect to be told no.

dodmwe

dunstonh said:

I can then transfer my personal pension from Aviva to Aegeon who operate my employers scheme. Is it possible that even though even though the employer DB and employer DC are separate schemes, they fall under my employers umbrella, and therefore may be more flexible on TFLS, or am I clutching at straws? 

Clutching at straws.

The majority of DB schemes dont allow PCLS to be paid from linked DC schemes to begin with and where they do, it is in the linked AVC or legacy DC scheme.      Where it is a closed DB scheme with an unrelated master trust pension (which most Aegon workplace pensions are), then there is no link between the schemes.

You can ask the question but expect to be told no.

Thanks for this.

Am I right in thinking HMRC would allow this flexibility as long as you don’t breach the £268,275 TFLS (or there is nothing in HMRCs rules that does not allow this), but it is the pension schemes themselves that restrict this flexibility?

Pat38493

I think it’s still clutching at straws because the new scheme is not an AVC of the DB pension it’s still a separate pension