Pension - Tax Free Lump Sum or Not?

AuntyJean

Just been advised I don't have a final salary pension pot after all, it is a DC pension so I can select drawdown amounts. The original pension was a final salary but the company I worked for sold out to another in 2007 then they sold out to another in 2015 - My pension pot was transferred and it must have changed then.  

Marcon

AuntyJean said:

I have a DB Pension and with illustrations online it shows my pot will run out at different ages depending on draw down, it that correct?

If you have a DB pension it's payable for life.

Are you sure it's not a defined contribution arrangement?

Marcon

Albermarle said:

Vitor said:

IMHO the OP shouldn’t focus on “will I pay tax on the interest” but on the much bigger questions of guaranteed lifetime income and IHT planning. An IFA would probably say: don’t touch a DB pension unless you’ve got a very compelling reason. Of course if Reeves clobbers pensions with IHT that will shift the landscape. 

The Govt will introduce legislation in 2027 that will include unused DC pension pots in IHT calculations. This was announced in the last budget, and the legislation is going through the usual process. 

DB pensions are not involved, and can not be as there is no money to leave at the end. 

Just to expand on that a bit... If the DB scheme has a guarantee period (many do - typically five years from when the pension starts to be paid), then there could be a modest lump sum payment if the pensioner dies before receiving all the payments due during that period.

Albermarle

AuntyJean said:

Just been advised I don't have a final salary pension pot after all, it is a DC pension so I can select drawdown amounts. The original pension was a final salary but the company I worked for sold out to another in 2007 then they sold out to another in 2015 - My pension pot was transferred and it must have changed then.  

A very common scenario is for a private sector employee to be in a DB pension scheme in the first part of their career, but these schemes were closed to new entrants/contributions at some point in the last 10 to 30 years, due to being perceived as too expensive for the employer. Employees would then be started on a new DC scheme.
However rights built up in the old DB scheme would normally still exist.
For example the DB scheme I was in was stopped after I had been with the company about 15 years.
When I retired 20 years later ( different employer) I was able to take a pension from that old DB scheme based on the 15 years I was in it. Plus of course I also had the DC pot ( like you have ( I had built up in the following years
I think you need to investigate a bit further in case you still have some entitlement to that old final salary scheme.
Maybe there was some type of buyout of the scheme but I think you need to check.

DRS1

We don't know who the OP worked for back then (do we?).  If it was a smaller employer it may well not have set up a final salary scheme at all - there were DC (Money Purchase) schemes even back in the 80s.

The OP speculates that the change (converting final salary benefits into DC benefits) happened as a result of a corporate transaction but that seems unlikely - if it did happen it would have needed individual consent from each person affected.