NHS pension Tax free lump sum and the LSA

tryingtounderstandfinance

I’m aware the maximum tax free lump sum one can take from pensions is around £268,000. I’m a deferred member of the 1995 NHS scheme and will take a pension and a lump sum at 60,(though plan to continue working).

If the lump sum I take is, for example £200,000, does this mean I have approx £68,000 still available to take tax free from my DC pension in the future (provided this is a maximum of 25% of the DC pension)?

The reason for asking is that I could take more or less lump sum from the NHS pension and need to work out how it will affect subsequent pension withdrawals. 

So far I haven’t located a clear answer, so thanks in advance for any replies. 

MallyGirl

DB pensions interact with that £268k differently. Someone with the right knowledge will be along soon to answer. I will add NHS into your title to attract their attention 

Silvertabby

£268,275 is the maximum you can take from all of your pension schemes.

When you apply for your DC pension you will be asked how much tax free cash you have already taken from other pensions, and your DC lump sum will be reduced (from 25%) if necessary.

As your NHS lump sum is variable, you must be considering commutation - ie, giving up part of your fully index linked pension for life for one-off tax free cash.  As you may have read on these boards, the NHS/public sector commutation rate is a p.poor 1:12, especially as you are considering taking this pension early.

If your numbers support it, and if you really need maximum cash, another way could be to reduce the amount taken from the NHS in order to take the maximum 25% from the DC scheme.

Marcon

Silvertabby said:

£268,275 is the maximum you can take from all of your pension schemes.

....plus the 25% from up to 3 small personal pots: https://www.litrg.org.uk/pensions/pension-withdrawals/small-pensions

leosayer

Further to the above, in some circumstances it may be possible to take a greater amount of tax free cash than the £268k LSA limit due to protected scheme specific lump sum arrangements. 

I don't know if the NHS has this but it's worth checking before you take lump sums from any pension because doing so in the wrong order can reduce your entitlements.