Lump sum when on benefits

saintscouple

QrizB said:

saintscouple said:

Yes, it is a defined benefit scheme. 
No the £8650 is the total pension pot.

There is no "pot" with a Defined Benefit scheme.

Exactly what does it say next to the £8650 number? And what pension is is offering to pay, how many ££ per year?

QrizB said:

saintscouple said:

Yes, it is a defined benefit scheme. 
No the £8650 is the total pension pot.

There is no "pot" with a Defined Benefit scheme.

Exactly what does it say next to the £8650 number? And what pension is is offering to pay, how many ££ per year?

DRS1 said:

Defined benefit schemes don't have a pot as such.  It might be a transfer value I suppose.
55 would be young for a "normal retirement age" which would usually be 60/65/67 - 55 is typically the youngest age from which you can take early retirement but early retirement usually requires consent from the trustees or the employer.  
I raised the point because with some benefits if you can take a pension as of right from a certain age then the benefit requires you to do so (or you are treated as if you have done so).  If that age really is 55 you may want to dig a bit deeper and perhaps look at taking the benefits from the Aviva Scheme (in whatever way will least affect your benefits).
I confess I am wondering if the Aviva Scheme really is defined benefits rather than defined contribution given the way you describe those options - they are not what you'd expect from a defined benefits scheme (which is basically a lump sum at retirement plus a pension for life (with spouse's or dependants' pension after you die)).  The problem with taking all £6k from the Aviva Scheme is that a large chunk of that would be taxable - check but I imagine only 25% of the £8650 pot can be taken tax free.
Sorry I seem to be making this more complicated.  Ignore me and just do what SVaz said as it is far simpler but maybe have a read around the benefits you are on to see if there is any mention of pensions.

Perhaps this helps




I really am out of my depth with understanding these things, and really appreciate all the advice given.

If i take the lump sum option from the Aviva pension wouldn´t that mean only aprox £2k would be tax free, the rest will be taxed? 

saintscouple

To clarify, my wife and I are on a joint Universal Credit benefit. 
I understand the rules that a pension lump sum is treated as savings, and with UC you can have a maximum of £6k in savings before it affects your benefit. 
Hence only wanting a lump sum at this time. 

saintscouple

Don´t know if my maths is correct, but if the Aviva balance is £8k i would get £2k tax free, the other £6k is taxed at 20%, meaning £1.2k is lost, the amount received would be £6.8k.
UC will then deduct £4.35 for every £250 in savings over the £6k - thus it would be wise to spend that £800 quick, on things like appliances. 

born_again

saintscouple said:

Don´t know if my maths is correct, but if the Aviva balance is £8k i would get £2k tax free, the other £6k is taxed at 20%, meaning £1.2k is lost, the amount received would be £6.8k.
UC will then deduct £4.35 for every £250 in savings over the £6k - thus it would be wise to spend that £800 quick, and things like appliances. 

• For each £250 above £6,000, your UC is reduced by £4.35 a month

JoeCrystal

saintscouple said:

Don´t know if my maths is correct, but if the Aviva balance is £8k i would get £2k tax free, the other £6k is taxed at 20%, meaning £1.2k is lost, the amount received would be £6.8k.
UC will then deduct £4.35 for every £250 in savings over the £6k - thus it would be wise to spend that £800 quick, on things like appliances. 

It reduces until you cannot get universal credits by the time you reach £16k. Have you considered having more savings, perhaps?

QrizB

saintscouple said:

Perhaps this helps

Thank you, and yes it does. It's a money purchase (ie. Defined Contribution) scheme. It does have a pot and that pot was valued at £8211.55 in March last year.

saintscouple said:

I really am out of my depth with understanding these things, and really appreciate all the advice given.
If i take the lump sum option from the Aviva pension wouldn´t that mean only aprox £2k would be tax free, the rest will be taxed? 

Yes, 25% of it will be paid tax-free, the rest is taxable. Whether you actually have to pay any tax on it, or not, will depend on your taxable income for the year. And as may have already been mentioned, the pension company might charge tax at first and you'll get a refund later.

saintscouple said:

Don´t know if my maths is correct, but if the Aviva balance is £8k i would get £2k tax free, the other £6k is taxed at 20%, meaning £1.2k is lost, the amount received would be £6.8k.

If you've used your tax-free Personal Allowance and the £6k is taxed at 20%, yes, eventually. But if you've got unused Personal Allowance , you'll pay less tax than that; some of it might be taken as tax to begin with, then refunded later.

saintscouple said:

UC will then deduct £4.35 for every £250 in savings over the £6k - thus it would be wise to spend that £800 quick, on things like appliances.

I don't know the UC rules - they get debated on the Benefits board by cleverer people than me - but yes, spent on things like that.

DRS1

Do you actually need to take the £6k at 55?  Might it be better to leave it in the pension(s) until SPA if you are not going to spend it?
I know nothing about Universal Credit but the little I have read suggests that anything in the pension can be ignored.  See below
Pension freedoms and DWP benefits - GOV.UK

JoeCrystal

This pdf is more up-to-date although not government website, 

https://www.ageuk.org.uk/siteassets/documents/factsheets/fs91-pension-freedom-and-benefits.pdf

And more importantly, there are case studies in this pdf that may help the OP understand the potential impacts..

saintscouple

JoeCrystal said:

This pdf is more up-to-date although not government website, 

https://www.ageuk.org.uk/siteassets/documents/factsheets/fs91-pension-freedom-and-benefits.pdf

And more importantly, there are case studies in this pdf that may help the OP understand the potential impacts..

Thank you, this confirms the £6k capital, and rules above that limit