Got a DB and DC pension scheme, I don't want to commute any DB for tax-free cash, Can I?

RogerPensionGuy

Just a little update on this thread as I was rereading it.

Just 6 months ago I was essentially 100% not going to dilute my DB scheme via taking tax free cash out of it.

6 months on I'm of the opposite view funnily. 

A few months back my DB scheme pushed up commutation rates and CETVs, in my case at 62, my commutation factor has upped from X 22 to X 25.

Plus I've been doing more thinking and currently feeling like I should treat my DC as a long-term or even a reserve pot down the road or possibly its IHT is currently loke looking favorable place to keep value. 

So infact, I moved all my AVCs from the DB to my DC scheme and will just monitor that DC pot. 

And back on track, I have now decided to take maximum TFLS out of DB pension. Was planning February 2024, but it now appears they expecting the scheme will get a 5% uplift in April2024(its inflation linked, but only a maximum of 5% in one year)

My paid employment is currently still on track to end paying me in about a month or 6 weeks and I have sufficient cash that I don't need pension income for a couple of years. 

I could keep delaying the DB activation and it will keep getting bigger as its already 2 years in deferment from scheme NRA of 60.

But feel I need to start venting sooner than just letting it grow and grow.

Going back over many of my thoughts these last two years, funny how I keep changing me mind, I was previously totally paranoid about getting clobbered with LTA charges and very very nearly activated the DB the March 22 & 23 and just held off hoping the LTA would be raised.

I wonder if anything in this autumn statement coming will make me change my mind yet again.

My current paranoid is trying to plonk as much input in to the DC scheme this next month ot two and then leave that DC pot alone unless I decide I needs to take some out.

I re-watched the video link I put in here 6 months ago in the 1st or 2nd post here, I still have to pinch myself that the LTA has essentially gone.

Albermarle

Doctor_Who said:

Albermarle said:

Linton said:

NoMore said:

RogerPensionGuy said:

RogerPensionGuy said:

Got a DB and DC pension scheme, I don't want to commute any DB for tax-free cash, can I?

I have a good DB deferred scheme that is inflation indexed linked up to 5% PA and am intending to activate it just after the 6th of April 2024 (35K PA) when hopefully it will not get any LTA % tag applied to it and this timing maybe helpful should the LTA or anything like it be put back on the pension table as I am guessing somthink will be invented or reinvented in 2025 or 2026.

I also have a 500K DC pot approximately and stopping paid employment before xmas this year.

Under the current rules the above looks like a 1.2M pension overall so I am somewhat happy.

Does anyone know if under the new rules if I can take the maximum 268K tax-free from the DC pot or is it only possible to take 25% maximum from any pension pot?

Reason being I really have a good use for 268K cash next year but, would much rather that I don't commute any DB value to get any tax-free out of it. 

The video below is a good one and mentions how this 268K or 25% may be achieved across various pension pots, I am hoping that I can suck out 268K outa my DC pot and leave the DB undiluted. The video at time/in between 4mins to 6mins covers my question. However all the video is well worth a watch, its a great channel. 

https://youtu.be/wJBTItv5JSM

If anyone has any more up to date info please post.

The link below was released today, I tried reading it but just got too confused.com, can any good reader(smart-person) tell me if my plan above of not commuting any of my DB scheme and chunking out that maximum 268K Tax-Free cash out of a DC scheme?
.
https://www.gov.uk/government/publications/abolishing-the-pensions-lifetime-allowance

Being discussed here, LTA abolition from 2024 — MoneySavingExpert Forum the general interpretation is yes you can get the 268k from your Dc pension alone as LTA abolished so DB pension uses none of the new Tax free pension amount when you don't take PCLS from it. BUT this is currently only a proposal so when it comes to it being actual law double check that its sill the case.

I thought the OP was wanting to take the DB TFLS equivalent from his DC pension.  The proposed change to the law could permit £268K to be taken from the DC pension alone but only if that is 25% of the DC pot.  I see no proposal to be able to take one pension's TFLS from a different pension.

I did not take the PCLS when I started taking my DB pension, so hopefully now this will increase what I can potentially take from my DC pots. However as you rightly point out my DC pots would have to be over a Million Pounds to take full advantage of this, and unfortunately they are not. Maybe if I hang on a few years and markets have a good bull run, but then probably the legislation will change again.....

And that's one thing you can be certain of! 

This being the most likely topic for change in my opinion.

Death and taxes and pensions | Institute for Fiscal Studies (ifs.org.uk)

RogerPensionGuy

The item below is helpful, but indeed it shows how confusing the governments football of pensions these last many years makes it awkward to understand

I can only hope they leave pension football alone for 10 years or more so prudent savers can feel more confident and engage and plan this stuff.

I had to stop watching the presentation at 25mins and have a 30min break before I consumed the rest, think I'll have to watch it a few more times and maybe understand it more, but it's a good output.
.
https://youtu.be/yiJGV9cvCeU?si=8MF5ZinLvqsm_3X_

RogerPensionGuy

I have re-watched the video link in my last post above. 

I cannot see any big drastic stuff I wasn't expecting, however I noticed a few little tweaks that look helpful for people in some various positions. 

My main feeling is I have been paranoid about the LTA for a good few years and feel I understand it okay, but trying to follow the exact details in the video wasn't easy watching IMHO. 

With so many different acronyms and then the £1.073,100 and £268,275 figures being mentioned all the time, I just wish they could of rounded the LTA up a tad, but guess that would just cause more confusion,  1.2M/300K would of been beautiful IMHO. 

With the various governments playing pension football for the last 17 years and just eroding pension confidence because of continuous changes and making sensible planning so problematic, I just feel no government will actually tinker with pensions for at least 3 or 4 years, but without a doubt, they will indeed tinker with it in the future, hopefully it will be many years, unless of course they make nice changes.

Pat38493

RogerPensionGuy said:

I have re-watched the video link in my last post above. 

I cannot see any big drastic stuff I wasn't expecting, however I noticed a few little tweaks that look helpful for people in some various positions. 

My main feeling is I have been paranoid about the LTA for a good few years and feel I understand it okay, but trying to follow the exact details in the video wasn't easy watching IMHO. 

With so many different acronyms and then the £1.073,100 and £268,275 figures being mentioned all the time, I just wish they could of rounded the LTA up a tad, but guess that would just cause more confusion,  1.2M/300K would of been beautiful IMHO. 

With the various governments playing pension football for the last 17 years and just eroding pension confidence because of continuous changes and making sensible planning so problematic, I just feel no government will actually tinker with pensions for at least 3 or 4 years, but without a doubt, they will indeed tinker with it in the future, hopefully it will be many years, unless of course they make nice changes.

One thing is that about 14 minutes in, the presenter clearly and categorically confirms that taking DB pension income, does not have any impact on future tax free cash.  So, in future you would be able to put a large DB pension into payment, and then still take £268K of tax free cash out of DC pensions afterwards.

Beckster1964

Further to previous comment, the DC pot would need to be big enough to allow £268k to be taken as tax free cash. I didn’t quite follow the change of rules around what percentage can be taken as tax free cash though! Perhaps others can help on that.

Pat38493

Beckster1964 said:

Further to previous comment, the DC pot would need to be big enough to allow £268k to be taken as tax free cash. I didn’t quite follow the change of rules around what percentage can be taken as tax free cash though! Perhaps others can help on that.

They seem to have rephrased the legislation along the lines that you cannot take a tax free lump sum that is more than a third of the amount that you are putting as an income source.  This is basically the same maths as 25% of the total, so for DC funds I guess it doesn't change anything - I wasn't clear about the significance of this for DB.  I think there were some people hoping that you could use the value of your DB pension to support taking a lump sum from your DC pension larger than 25% of the total DC pot but this is not the case.

michaels

Pat38493 said:

Beckster1964 said:

Further to previous comment, the DC pot would need to be big enough to allow £268k to be taken as tax free cash. I didn’t quite follow the change of rules around what percentage can be taken as tax free cash though! Perhaps others can help on that.

They seem to have rephrased the legislation along the lines that you cannot take a tax free lump sum that is more than a third of the amount that you are putting as an income source.  This is basically the same maths as 25% of the total, so for DC funds I guess it doesn't change anything - I wasn't clear about the significance of this for DB.  I think there were some people hoping that you could use the value of your DB pension to support taking a lump sum from your DC pension larger than 25% of the total DC pot but this is not the case.

Unless both pots are LGPS for some reason - shame not the case for CS with the commutation rate being so unattractive

RogerPensionGuy

Quote from a recent previous post here below.

"I think there were some people hoping that you could use the value of your DB pension to support taking a lump sum from your DC pension larger than 25% of the total DC pot but this is not the case"

Indeed in the very early days after the spring budget 2023 it looked potentially possible that the quoted information about could be possible. 

All my understandings presently are that it's not possible unless pensions in question are under one company provider which will most often not the case.

It's funny how stuff changes, a good while back I was paranoid about not taking ant TFLS from a good DB and hopefully being allowed to take more that the 25% in my DC pot in the future. 

My plans have currently changed, my DB scheme put up it's TFLS commutation rate and CETV rates, my commutation has gone from X 22.5 to X 25 and for me it's looking better to take maximum DB TFLS when I activate DB scheme. 

I was mincing over activation of DB before or after 5th of April 2024 because of LTA records stuff, I don't think it will make any difference, but still slightly feeling after is more prudent. 

As it happens due income tax considerations, looks like I'll delay DB activation until deeper in to 2024/25 tax year as a balancing act and DB pension increases every day it's deferred. 

Hopefully Pete Matthew on Meaningful Money will do an update on the LTA soon again. 

michaels

RogerPensionGuy said:

Quote from a recent previous post here below.

"I think there were some people hoping that you could use the value of your DB pension to support taking a lump sum from your DC pension larger than 25% of the total DC pot but this is not the case"

Indeed in the very early days after the spring budget 2023 it looked potentially possible that the quoted information about could be possible. 

All my understandings presently are that it's not possible unless pensions in question are under one company provider which will most often not the case.

It's funny how stuff changes, a good while back I was paranoid about not taking ant TFLS from a good DB and hopefully being allowed to take more that the 25% in my DC pot in the future. 

My plans have currently changed, my DB scheme put up it's TFLS commutation rate and CETV rates, my commutation has gone from X 22.5 to X 25 and for me it's looking better to take maximum DB TFLS when I activate DB scheme. 

I was mincing over activation of DB before or after 5th of April 2024 because of LTA records stuff, I don't think it will make any difference, but still slightly feeling after is more prudent. 

As it happens due income tax considerations, looks like I'll delay DB activation until deeper in to 2024/25 tax year as a balancing act and DB pension increases every day it's deferred. 

Hopefully Pete Matthew on Meaningful Money will do an update on the LTA soon again. 

Envious much as I have a commutation rate of just 12x on the DB and only 700k in the DC pot