Advice regarding DB Pensions and 25% Tax FREE

Qyburn

As a contrast the Scottish teachers scheme expresses it as a multiplie of the annual amount given up ..

"Currently, at retirement you can commute up to 35.71% of your pension on a £1:£12 basis in order to receive a tax free lump sum."

leosayer

One thing to find out is if the DB schemes are linked to the DC schemes in any way eg. if they are with the same employer.

This is because some DB pensions give you the ability to take the pension commencement lump sum tax free from a linked DC pot without reducing your annual DB pension.

hyubh

Qyburn said:

As a contrast the Scottish teachers scheme expresses it as a multiplie of the annual amount given up ..

"Currently, at retirement you can commute up to 35.71% of your pension on a £1:£12 basis in order to receive a tax free lump sum."

And yet...

The amount of a lump sum payable under regulation 162 must—
(a) be a multiple of £12; and
(b) not exceed P’s permitted maximum.

https://www.legislation.gov.uk/ssi/2014/292/regulation/163/made

“permitted maximum” means the amount determined in accordance with paragraph 2 of Schedule 29 to FA 2004

https://www.legislation.gov.uk/ssi/2014/292/regulation/3/made

The available portion of the member’s lump sum allowance is—



where—

     CSLA is the current standard lifetime allowance, and

    AAC is the aggregate of the amounts crystallised by each benefit crystallisation event which has occurred in relation to the member before the member becomes entitled to the lump sum, as adjusted under sub-paragraph (7) (and if no such benefit crystallisation event has occurred, is nil).

https://www.legislation.gov.uk/ukpga/2004/12/schedule/29/2004-11-01

In other words: public sector schemes with the fixed 12/1 commutation rate use the 25% maximum PCLS defined in covering pensions legislation. The 'quirk' is that the amount of lump sum taken affects what this maximum is in monetary terms. But it's still '25%'.

Qyburn

The bit I quoted was from the SPPA forecast prior to her applying, and it looks like a mistake because the claim form says 25%, although that's expressed as 25% of fund value rather than 25% of annual pension.

"However, there is a maximum lump sum that can be taken, as allowed by HM Revenue & Customs, of 25% of the fund value."

In our case it was academic as she didn't take any lump sum at all.

atush

You dont have a very large pension provision.  7K DB income and to smallish DB pots.

Why do you want/need to take 25% from the DC pots?  I'd work on increasing them instead.

eastcorkram

atush said:

You dont have a very large pension provision.  7K DB income and to smallish DB pots.

Why do you want/need to take 25% from the DC pots?  I'd work on increasing them instead.

Maybe true, but I bet it's more than an awful lot of people. Plenty of people with no DB pension at all.