lump sum

Iantu

HI, I'm 59 and I have a frozen final salary pension I am thinking about taking out a small lump sum now and some later, can I do this and still leave the rest of the pension until I actually retire or do I have to claim all of my pension from when I first receive a lump sum

Silvertabby

Iantu said:

HI, I'm 59 and I have a frozen final salary pension I am thinking about taking out a small lump sum now and some later, can I do this and still leave the rest of the pension until I actually retire or do I have to claim all of my pension from when I first receive a lump sum

No, with a DB/final salary scheme it's all or nothing.

Flugelhorn

depends on the rules of the scheme  - if it is a final salary DB pension then usually it is all or nothing - also some such pensions don't increase in value after the normal retirement age

Dazed_and_C0nfused

Iantu said:

HI, I'm 59 and I have a frozen final salary pension I am thinking about taking out a small lump sum now and some later, can I do this and still leave the rest of the pension until I actually retire or do I have to claim all of my pension from when I first receive a lump sum

It's very very unlikely to be frozen, most DB (final salary) pensions have an element of inflation protection.

Do you know yours definitely doesn't?

And you can usually only take a PCLS once the pension itself commences.  If it is a single scheme I can't think of an example where you could take your pension at different times.

Albermarle

You normally do not have to take a lump sum at all if you do not want. In return you will get an increased annual pension.
Sometimes you have the possibility to take different amounts of lump sum, with the corresponding reduction in annual pension.

Mutton_Geoff

Albermarle said:

You normally do not have to take a lump sum at all if you do not want. In return you will get an increased annual pension.
Sometimes you have the possibility to take different amounts of lump sum, with the corresponding reduction in annual pension.

Wise words from Albermarle. The temptation of "tax free cash" that rings like "free money" in our ears should be carefully measured using the commutation rate your pension scheme uses.

Check what you are giving up from your monthly pension bearing in mind the effects of inflation. Look at the cost of buying an annuity that would match the amount of decrease in your pension to help measure the real value of that tax free money.

Mutton_Geoff

New Year's Resolution - don't bother taking time to reply to questions from newbies 

zagfles

Mutton_Geoff said:

New Year's Resolution - don't bother taking time to reply to questions from newbies 

Why? You gave OP advice, OP thanked you for it. It wasn't advice that required any sort of followup. What did you expect? 

RogerPensionGuy

This thread reminds me of a sorta similar situation, but different. 

A few years back a few friends like myself had frozen/closed DB pensions with AVCs in these schemes.

The information was clear that a person couldn't just take out any or all the AVCs and let the DB scheme roll up, but it was possible to active the DB scheme and leave/sort out AVCs later on.

Two friends very nearly activated DB core pensions leaving big AVC pots in the scheme and didn't fully understand that by doing this sequence, when going to take out AVCs later on only 25% of these AVC balances would be available tax-free, these people didn't really get involved in pensions apart from filling them up.

I can only guess plenty of people have and still activate core DB schemes and go back for AVCs later to learn the lesson above.

***

A slight side note, one guy was over the 25% tax free limit on the AVCs, so when he activated his core pension, he took maximum tax free using 80% of his AVCs and left the over limit AVCs in the old pension low cost scheme to deal with later on.

His can go back and take out 25% of them AVCs out tax free up to the total 268K limit and the remaining 75% will need to be taken paying tax or move these funds in to his DC scheme, I understand these AVC funds that transfer can/will be crystallised or uncrystallised depending on if over the current 268K TFLS.

The above tail or nearly tail for these two guys was to take more interest in pension investment items or use an IFA or similar. 

Dazed_and_C0nfused

RogerPensionGuy said:

This thread reminds me of a sorta similar situation, but different. 

A few years back a few friends like myself had frozen/closed DB pensions with AVCs in these schemes.

The information was clear that a person couldn't just take out any or all the AVCs and let the DB scheme roll up, but it was possible to active the DB scheme and leave/sort out AVCs later on.

Two friends very nearly activated DB core pensions leaving big AVC pots in the scheme and didn't fully understand that by doing this sequence, when going to take out AVCs later on only 25% of these AVC balances would be available tax-free, these people didn't really get involved in pensions apart from filling them up.

I can only guess plenty of people have and still activate core DB schemes and go back for AVCs later to learn the lesson above. 

That is the default position for the majority of such schemes.

LGPS appears to be an outlier in allowing more than 25% of the AVC to be taken tax free, I don't think that is normal across other similar DB scheme like the NHS, Civil Service etc.

Silvertabby

RogerPensionGuy said:

This thread reminds me of a sorta similar situation, but different. 

A few years back a few friends like myself had frozen/closed DB pensions with AVCs in these schemes.

The information was clear that a person couldn't just take out any or all the AVCs and let the DB scheme roll up, but it was possible to active the DB scheme and leave/sort out AVCs later on.

Two friends very nearly activated DB core pensions leaving big AVC pots in the scheme and didn't fully understand that by doing this sequence, when going to take out AVCs later on only 25% of these AVC balances would be available tax-free, these people didn't really get involved in pensions apart from filling them up.

I can only guess plenty of people have and still activate core DB schemes and go back for AVCs later to learn the lesson above. 

Leaving AVCs until a later date is an option with the LGPS - possibly because it is unlawful to irrevocably tie AVCs with another pension fund?

The 'options' letter asked soon-to-be retirees if they wanted to take their AVCs with their main scheme benefits, or defer them - and I was often asked what the advantages would be if they did defer.

I could only point out the disadvantages - ie, would only be able to take 25% of tax free cash instead of the possible 100% when taken with the main scheme benefits.  Plus not able to use the residual AVC funds to buy additional fully index linked/dual life LGPS benefits.