Taking DB pension early to access tax free portion from combined DB/DC scheme

Baggy2000

Without getting too much into speculation over forthcoming budget pension tax changes....

One of my pension schemes is a combined DB/DC scheme where the DB pension is a relatively small portion. I can take it 3 years early for an actuarial reduction of around 10.7% but this gives me access to the 25% tax free portion before the budget ((DB annual pension x 20) + DC) x 25% taken from DC pot i.e. more than just taking 25% of the DC pot in isolation.

Because of my wife's earnings there is sufficient headroom (by juggling things) to effectively re-invest the lump sum value on the stock market in an S&S ISA and swap the equivalent ISA cash saving value into cash interest rates without my wife incurring any more tax. i.e. no real loss of stock margin gains/losses and no extra tax from extra savings.

Any views please on whether this is worthwhile budget change de-risking exercise as would be marginally worse off if I live 20+ years accounting for the inflation linking on DB now vs increased DB pension if initiated in 3 years. If the DB values were much higher it would probably be better just to wait on what happens in the budget.

sammyjammy

There is no pot from the DB portion, nor is there a 25% tax free, both of these options only apply to the DC element of your pot.

IMO its not wise to make decisions based on a pension change that may or may not (probably not) happen.

Baggy2000

sammyjammy said:

There is no pot from the DB portion, nor is there a 25% tax free, both of these options only apply to the DC element of your pot.

IMO its not wise to make decisions based on a pension change that may or may not (probably not) happen.

Thanks and that is correct. Yes the 25% comes from the DC pot but the amount is of the DC value plus 20xDB so better than just a normal 25% of the DC value. The downside seemed small compared with the potential upside if the rules do change albeit unlikely