Total Pension Pot calculation…

cockerspaniels

Hi,

looking at an old private pension forecast from 3 years ago. If my lump pension was 143k with a reduced pension of 21,475.68 annually. I will request an updated forecast, but for the moment though can you assist me with some queries based on numbers above;

How much pls is my total pension pot ? Is it 143k x 4?

Appreciate any advice how best to take it incurring the least amount of tax?

QrizB

Is this a Defined Benefit (DB) pension, or a Defined Contribution (DC) one? As you're talking about a lump sum and a reduced pension, it sounds more like a DB?

kaMelo

It depends what type of pension you have. If defined contribution, the pot is worth what it is, if defined benefit there is no pot value, just a promise to pay you a certain amount in line with the pension scheme rules.

cockerspaniels

Yes, thanks it is a (DB) pension.

QrizB

cockerspaniels said:

Yes, thanks it is a (DB) pension.

In which case, there isn't a pot.

There will be a CETV, but you'll need to take regulated financial advice.

Dazed_and_C0nfused

cockerspaniels said:

Yes, thanks it is a (DB) pension.

Then there is no pot on the way you are thinking.

You get a pension based on the scheme rules.

You can ask for a CETV if you are interested in what the pension company will give you to get out of paying you your pension but transferring that into a DC pension is not cheap (could easily be £5k-10k) and quite possibly not a good idea.

Albermarle

cockerspaniels said:

Yes, thanks it is a (DB) pension.

So as said you do not have a pot. You have a promise to pay you a lump sum and then a guaranteed pension each year. You maybe be able to forgo or reduce the lump sum, in return for a higher pension.

Any lump sum will be tax free, but the pension income is taxable in exactly the same way employment income is taxed.
When you get the state pension this is also taxable income as well.

dunstonh

Appreciate any advice how best to take it incurring the least amount of tax?

Tax should not be your primary driver.   Best outcome should be.   Very often with DB schemes, the best outcome would also create more tax.

How much pls is my total pension pot ? Is it 143k x 4?

As mentioned, you don't have a pot (there is no 25% TFC as the calculation on DB schemes is different for PCLS).

cockerspaniels

Many thanks for the replies and for explaining it’s not a pot and that it will be based on the pension scheme rules.  

I was in a final salary scheme. I need to check meantime the figure they are using for their calculations. 

Apologies… forgot to mention the figures above were option 2.  

Option 1 was full pension: 29,505.48 - does that mean if I selected this option, I would receive a monthly payment -pay tax (like state pension) and forgo taking lump sum?

As you have mentioned I will take advice when I receive the current private pension forecast.  Should I request a CETV then or not when I do this pls?

On my state pension forecast that I requested last month. It states I have the full qualifying years for state pension, even though I was contracted out (Cope)(was not aware of Cope until I received the forecast letters in recent years). So will I then receive a reduced state pension because of this, or it will not impact me? 

Is there a scheme to reclaim Cope? 

Dazed_and_C0nfused

cockerspaniels said:

Many thanks for the replies and for explaining it’s not a pot and that it will be based on the pension scheme rules.  

I was in a final salary scheme. I need to check meantime the figure they are using for their calculations. 

Apologies… forgot to mention the figures above were option 2.  

Option 1 was full pension: 29,505.48 - does that mean if I selected this option, I would receive a monthly payment -pay tax (like state pension) and forgo taking lump sum?

As you have mentioned I will take advice when I receive the current private pension forecast.  Should I request a CETV then or not when I do this pls?

On my state pension forecast that I requested last month. It states I have the full qualifying years for state pension, even though I was contracted out (Cope)(was not aware of Cope until I received the forecast letters in recent years). So will I then receive a reduced state pension because of this, or it will not impact me? 

Is there a scheme to reclaim Cope? 

You will need to choose whether to take maximum pension (taxable income) or a smaller pension (all still taxable) and a one off tax free pension commencement lump sum (PCLS).

Sometimes the PCLS is poor value, you can give up say £1 of pension for £12 lump sum.  But you might be getting your pension for 30-40 years.

Yours looks like £1 of pension given away gets you £17.80, so you need to decide if that is better for you than the bigger pension.

You only need a CETV if you want to give up your right to that guaranteed pension.  Do you actually want to do that?

If your State Pension forecast states you have already accrued £230.25 then that is what you will get (plus triple lock increases each year).

No you cannot reclaim COPE, just think of it as an unidentified part of your £29.5k pension.

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Pensions, annuities & retirement planning — MoneySavingExpert Forum

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