Tax-free lump sum

akkers

I am in a LGPS (local govt) pension scheme. I can see what pension I will get etc. However, it does not tell what the total pot is; I need to know this to work out tax-free lump sum.

As per regulations you can only draw 25% of the pot as tax-free. So if I dont know the pot I cannot plan my retirement and how much to take as lump sum without encuring tax.

Marcon

akkers said:

I am in a LGPS (local govt) pension scheme. I can see what pension I will get etc. However, it does not tell what the total pot is; I need to know this to work out tax-free lump sum.

As per regulations you can only draw 25% of the pot as tax-free. So if I dont know the pot I cannot plan my retirement and how much to take as lump sum without encuring tax.

It's 25% of the capital value of your LGPS benefits, rather than the 'pot' you get with a defined contribution scheme, so you won't see a 'pot' value.

This should help: https://www.lgpsmember.org/help-and-support/tools-and-calculators/lump-sum-calculator/#:~:text=When%20you%20take%20your%20pension%20your%20pension%20fund%20will%20ask,value%20of%20your%20pension%20benefits.

akkers

Still confused. So how do I find out capital value of my LGPS benefits. So I just want to know how much I can take in lump sum without being taxed.

xylophone

Have you put your figures into the calculator below?


https://www.lgpsmember.org/help-and-support/tools-and-calculators/lump-sum-calculator/




https://www.mandg.com/wealth/adviser-services/tech-matters/pensions/lump-sum-options/pension-commencement-lump-sum

Defined benefit schemes

Max cash = (20 x commutation factor x yearly scheme pension before commutation)
                                                      20 + (3 x commutation factor)

Commutation factor for LGPS is 12.

DRS1

Isn't LGPS one of those schemes where people on here say don't take a tax free lump sum because the commutation rate is lousy?

Maybe it is different if you have been paying AVCs.

Marcon

DRS1 said:

Isn't LGPS one of those schemes where people on here say don't take a tax free lump sum because the commutation rate is lousy?

Maybe it is different if you have been paying AVCs.

People say a lot of things, but ultimately it's for each individual to make their own choices. Given the number who do commute to the maximum in public sector schemes, the deterrent factor seems to be less than you might think.

Albermarle

DRS1 said:

Isn't LGPS one of those schemes where people on here say don't take a tax free lump sum because the commutation rate is lousy?

Maybe it is different if you have been paying AVCs.

AIUI most public sector schemes have poor commutation rates, they usually seem to be about 12.
So for most people it would probably be better not to take the lump sum from a strictly financial point of view, but many just see the Pound signs and do not really think about the regular pension they will be losing.