I can take a gov pension early but....

MikMikandThriceMik

Silvertabby said:

Nilgosc = Northern Ireland LGPS?

Depending on when you left, and the actual scheme rules (NI regs sometimes differ) you may be able to realise a larger tax free lump sum by commuting (giving up) some of your annual pension.  But this would be at the pretty poor rate of 1:12 (permanently lose £1 of fully index linked pension for the rest of your life for each £12 of tax free cash).

Whichever option you go for, the lump sum is totally tax free.

That is exactly what I plan on doing. Thank you.

Dazed_and_C0nfused

MikMikandThriceMik said:

Silvertabby said:

Nilgosc = Northern Ireland LGPS?

Depending on when you left, and the actual scheme rules (NI regs sometimes differ) you may be able to realise a larger tax free lump sum by commuting (giving up) some of your annual pension.  But this would be at the pretty poor rate of 1:12 (permanently lose £1 of fully index linked pension for the rest of your life for each £12 of tax free cash).

Whichever option you go for, the lump sum is totally tax free.

That is exactly what I plan on doing. Thank you.

You might want to look at the sums for that.

Say you take an extra £6000 PCLS and put that in a savings account paying 5%.

That costs you £500 of your pension.  For the rest of your life.  And the way inflation in looking that £500 could get in inflation increase of maybe 7% next year.

so I am thinking it might make more sense to take the largest lump sum now and put that lump sum in a challengers bank 5% ISA

QrizB

MikMikandThriceMik said:

Silvertabby said:

Depending on when you left, and the actual scheme rules (NI regs sometimes differ) you may be able to realise a larger tax free lump sum by commuting (giving up) some of your annual pension.  But this would be at the pretty poor rate of 1:12 (permanently lose £1 of fully index linked pension for the rest of your life for each £12 of tax free cash).

Whichever option you go for, the lump sum is totally tax free.

That is exactly what I plan on doing. Thank you.

If I was to offer you a loan of £12000 and say your payments would be £1000 a year, increasing annually by CPI, for the rest of your life, you'd run a mile. But that's more-or-less what you're agreeing to with 12:1 commutation.

Silvertabby

QrizB said:

MikMikandThriceMik said:

Silvertabby said:

Depending on when you left, and the actual scheme rules (NI regs sometimes differ) you may be able to realise a larger tax free lump sum by commuting (giving up) some of your annual pension.  But this would be at the pretty poor rate of 1:12 (permanently lose £1 of fully index linked pension for the rest of your life for each £12 of tax free cash).

Whichever option you go for, the lump sum is totally tax free.

That is exactly what I plan on doing. Thank you.

If I was to offer you a loan of £12000 and say your payments would be £1000 a year, increasing annually by CPI, for the rest of your life, you'd run a mile. But that's more-or-less what you're agreeing to with 12:1 commutation.

Exactly.  Yet 90% of LGPS retirees (probably other public sector pensioners as well) do go for maximum commutation.

michaels

Silvertabby said:

QrizB said:

MikMikandThriceMik said:

Silvertabby said:

Depending on when you left, and the actual scheme rules (NI regs sometimes differ) you may be able to realise a larger tax free lump sum by commuting (giving up) some of your annual pension.  But this would be at the pretty poor rate of 1:12 (permanently lose £1 of fully index linked pension for the rest of your life for each £12 of tax free cash).

Whichever option you go for, the lump sum is totally tax free.

That is exactly what I plan on doing. Thank you.

If I was to offer you a loan of £12000 and say your payments would be £1000 a year, increasing annually by CPI, for the rest of your life, you'd run a mile. But that's more-or-less what you're agreeing to with 12:1 commutation.

Exactly.  Yet 90% of LGPS retirees (probably other public sector pensioners as well) do go for maximum commutation.

Great news for the taxpayer!

Gimmeaminute

Silvertabby said:

QrizB said:

MikMikandThriceMik said:

Silvertabby said:

Depending on when you left, and the actual scheme rules (NI regs sometimes differ) you may be able to realise a larger tax free lump sum by commuting (giving up) some of your annual pension.  But this would be at the pretty poor rate of 1:12 (permanently lose £1 of fully index linked pension for the rest of your life for each £12 of tax free cash).

Whichever option you go for, the lump sum is totally tax free.

That is exactly what I plan on doing. Thank you.

If I was to offer you a loan of £12000 and say your payments would be £1000 a year, increasing annually by CPI, for the rest of your life, you'd run a mile. But that's more-or-less what you're agreeing to with 12:1 commutation.

Exactly.  Yet 90% of LGPS retirees (probably other public sector pensioners as well) do go for maximum commutation.

I think commutation is probably a very attractive option if you don't retire till age 67 and maybe you are not in the best of health. I am 55 next week and am taking my LGPS pension then and my decision was relatively straightforward in that there was no way I was ever going to swap future pension for a bigger lump sum.

Silvertabby

Gimmeaminute said:

Silvertabby said:

QrizB said:

MikMikandThriceMik said:

Silvertabby said:

Depending on when you left, and the actual scheme rules (NI regs sometimes differ) you may be able to realise a larger tax free lump sum by commuting (giving up) some of your annual pension.  But this would be at the pretty poor rate of 1:12 (permanently lose £1 of fully index linked pension for the rest of your life for each £12 of tax free cash).

Whichever option you go for, the lump sum is totally tax free.

That is exactly what I plan on doing. Thank you.

If I was to offer you a loan of £12000 and say your payments would be £1000 a year, increasing annually by CPI, for the rest of your life, you'd run a mile. But that's more-or-less what you're agreeing to with 12:1 commutation.

Exactly.  Yet 90% of LGPS retirees (probably other public sector pensioners as well) do go for maximum commutation.

I think commutation is probably a very attractive option if you don't retire till age 67 and maybe you are not in the best of health. I am 55 next week and am taking my LGPS pension then and my decision was relatively straightforward in that there was no way I was ever going to swap future pension for a bigger lump sum.

Rule of thumb is that if you think you will die within 14 years of taking your pension, then you could benefit from taking the bigger lump sum.  But the longer you live beyond 14 years, the chances are you'd probably be better off with the higher, fully index linked, pension.

MikMikandThriceMik

Gimmeaminute said:

Silvertabby said:

QrizB said:

MikMikandThriceMik said:

Silvertabby said:

Depending on when you left, and the actual scheme rules (NI regs sometimes differ) you may be able to realise a larger tax free lump sum by commuting (giving up) some of your annual pension.  But this would be at the pretty poor rate of 1:12 (permanently lose £1 of fully index linked pension for the rest of your life for each £12 of tax free cash).

Whichever option you go for, the lump sum is totally tax free.

That is exactly what I plan on doing. Thank you.

If I was to offer you a loan of £12000 and say your payments would be £1000 a year, increasing annually by CPI, for the rest of your life, you'd run a mile. But that's more-or-less what you're agreeing to with 12:1 commutation.

Exactly.  Yet 90% of LGPS retirees (probably other public sector pensioners as well) do go for maximum commutation.

I think commutation is probably a very attractive option if you don't retire till age 67 and maybe you are not in the best of health. I am 55 next week and am taking my LGPS pension then and my decision was relatively straightforward in that there was no way I was ever going to swap future pension for a bigger lump sum.

I am not at all sure I will make it to 67 myself but I have to take it in 2025 no matter what.
The default lump sum only goes up £300 and the default pension £200 pa if I take it in 2 years, so maybe I will forego the small increase not leaving it in for the last two years, and also not take a bigger lump sum in 2 weeks, just take the amount they give me.

Did anyone answer if this lump sum is looked on as earned income and is taxed as PAYE?

Thanks for all your help and understanding.

QrizB

MikMikandThriceMik said:

Did anyone answer if this lump sum is looked on as earned income and is taxed as PAYE?

Your tax-free pension commencement lump sum (PCLS) is tax-free.

Dazed_and_C0nfused

MikMikandThriceMik said:

Gimmeaminute said:

Silvertabby said:

QrizB said:

MikMikandThriceMik said:

Silvertabby said:

Depending on when you left, and the actual scheme rules (NI regs sometimes differ) you may be able to realise a larger tax free lump sum by commuting (giving up) some of your annual pension.  But this would be at the pretty poor rate of 1:12 (permanently lose £1 of fully index linked pension for the rest of your life for each £12 of tax free cash).

Whichever option you go for, the lump sum is totally tax free.

That is exactly what I plan on doing. Thank you.

If I was to offer you a loan of £12000 and say your payments would be £1000 a year, increasing annually by CPI, for the rest of your life, you'd run a mile. But that's more-or-less what you're agreeing to with 12:1 commutation.

Exactly.  Yet 90% of LGPS retirees (probably other public sector pensioners as well) do go for maximum commutation.

I think commutation is probably a very attractive option if you don't retire till age 67 and maybe you are not in the best of health. I am 55 next week and am taking my LGPS pension then and my decision was relatively straightforward in that there was no way I was ever going to swap future pension for a bigger lump sum.

I am not at all sure I will make it to 67 myself but I have to take it in 2025 no matter what.
The default lump sum only goes up £300 and the default pension £200 pa if I take it in 2 years, so maybe I will forego the small increase by leaving it in for the last two years, and also not take a bigger lump sum in 2 weeks, just take the amount they give me.

Did anyone answer if this lump sum is looked on as earned income and is taxed as PAYE?

Thanks for all your help and understanding.

No, the PCLS is tax free just like the 25% TFLS is with a DC pension.

The pension income itself is taxable and is taxed under PAYE.