Tax Free Cash > 25%, Scheme Specific Protection

HawkE

I was pleasantly surprised to find out I had scheme specific protection giving me tax-free cash > 25% for a workplace pension that I commenced in January 2006, details as follows:-

- A Day Tax free Cash: £400
- A Day Fund Value: £1000
- Current Value: £150,000  (of which approx. £60k contributions after A-Day, remainder is growth)

The pension administrator has said they don't calculate the tax-free cash as at today's value upon request.  I have tried to do it myself by reference to HMRC formula, but it is complex and I am unsure about the result.  The calculation for the tax free cash that I used was:

Tax free cash = £400 x 1.2 + 25% x (£150000-(0.7154x£1000))
= £480 + 25% x (£149,284)
= £480 + £37,321
= £37801

Since 25% of current value is £37500, then the "extra" tax free cash is £301.

Does this seem about right?

TheGreenFrog

This link contains the formula for calculating scheme protected TFC.  Also note that if you are in the fortunate position of being above the lump sum allowance there appear to be ways of taking the scheme protected tax free cash (the full amount, not just the amount in excess of 25%) on top of your full LSA.

https://techzone.aberdeenadviser.com/public/pensions/Tech-guide-scheme-specific-tfc#anchor_4

HawkE

TheGreenFrog said:

This link contains the formula for calculating scheme protected TFC.  Also note that if you are in the fortunate position of being above the lump sum allowance there appear to be ways of taking the scheme protected tax free cash (the full amount, not just the amount in excess of 25%) on top of your full LSA.

https://techzone.aberdeenadviser.com/public/pensions/Tech-guide-scheme-specific-tfc#anchor_4

Thank you.   Your point about ways of taking scheme protected TFC on top the full LSA is well made and wasn't something I was aware of.  The illustration provided at the link is helpful too as it clearly shows that if you take SIPP TFC first, and happen to also have scheme protected TFC, then you can indeed take that scheme protected TFC on top even if no LSA left (provided you have available LSDBA).