DB pension query .

snowlaser

Assuming the "big lump sum" referred to was a DB to DC transfer the most likely reason for a small top up is GMP Equalisation.  Those who just retired with a 25% lump sum MAY get something similar in due course, BUT not everyone is entitled to a GMP Equalisation payment because it is a payment to correct any gender inequality, and so not everyone has suffered that.

However, it could also be something else, for example maybe there had been an error in transfer value calculations at the time and now they have given people a bit extra to fix the error.  Presumably those people who got a cheque also got a letter with the cheques explaining what it was - so what did that say...?

sheslookinhot

snowlaser said:

Assuming the "big lump sum" referred to was a DB to DC transfer the most likely reason for a small top up is GMP Equalisation.  Those who just retired with a 25% lump sum MAY get something similar in due course, BUT not everyone is entitled to a GMP Equalisation payment because it is a payment to correct any gender inequality, and so not everyone has suffered that.

However, it could also be something else, for example maybe there had been an error in transfer value calculations at the time and now they have given people a bit extra to fix the error.  Presumably those people who got a cheque also got a letter with the cheques explaining what it was - so what did that say...?

The maximum lump sum anyone can get, retiring with a DB pension, is likely to be less than 25%. An ex- colleague reckoned, in his calculations, it was around 18%. In any case it is a figure calculated by the Actuary, not a straight 25%.

Marcon

sheslookinhot said:

snowlaser said:

Assuming the "big lump sum" referred to was a DB to DC transfer the most likely reason for a small top up is GMP Equalisation.  Those who just retired with a 25% lump sum MAY get something similar in due course, BUT not everyone is entitled to a GMP Equalisation payment because it is a payment to correct any gender inequality, and so not everyone has suffered that.

However, it could also be something else, for example maybe there had been an error in transfer value calculations at the time and now they have given people a bit extra to fix the error.  Presumably those people who got a cheque also got a letter with the cheques explaining what it was - so what did that say...?

The maximum lump sum anyone can get, retiring with a DB pension, is likely to be less than 25%. An ex- colleague reckoned, in his calculations, it was around 18%. In any case it is a figure calculated by the Actuary, not a straight 25%.

The rules of a DB scheme will dictate the maximum tax free cash a member can take, subject to HRMC limits. Plenty of DB schemes offer maximum tax free cash and it's increasingly common to express this as 25% of the capital value - eg https://www.nhsbsa.nhs.uk/employee-section/understanding-your-statement/maximum-lump-sum so I think your ex-colleague is pretty wide of the mark (probably basing his calculations on his own scheme without realising it differs for other schemes).

Silvertabby

sheslookinhot said:

snowlaser said:

Assuming the "big lump sum" referred to was a DB to DC transfer the most likely reason for a small top up is GMP Equalisation.  Those who just retired with a 25% lump sum MAY get something similar in due course, BUT not everyone is entitled to a GMP Equalisation payment because it is a payment to correct any gender inequality, and so not everyone has suffered that.

However, it could also be something else, for example maybe there had been an error in transfer value calculations at the time and now they have given people a bit extra to fix the error.  Presumably those people who got a cheque also got a letter with the cheques explaining what it was - so what did that say...?

The maximum lump sum anyone can get, retiring with a DB pension, is likely to be less than 25%. An ex- colleague reckoned, in his calculations, it was around 18%. In any case it is a figure calculated by the Actuary, not a straight 25%.

It depends on the scheme commutation factor.  Using an annual pension of £10K and the (p. poor) public sector commutation rate of 1:12 as an example:

£10K X 20 = £200K notional value
£200K X 25% = £50K maximum tax free cash.

But commuting at 1:12 gives us an annual pension of £6,428.57, and a tax free lump sum of £42,857.14.

The post commutation maximum lump sum is then 25% of the revised notional value calculation, being:
£6,428.57 X 20 plus £42,857.14 =
£171,428.54 X 25% = £42,857.14

Did your ex-colleague base his 25% figure on his original, pre commutation,  pension valuation?

sheslookinhot

What you have said in your opening sentence is accurate. Every scheme is different. However, It might be "expressed" as 25% but in reality it is unlikely to be.  My colleague is not wide of the mark. It was tested by a few others, in different schemes. How could you possibly arrive at that conclusion, without any other relevant facts ?

Silvertabby

sheslookinhot said:

What you have said in your opening sentence is accurate. Every scheme is different. However, It might be "expressed" as 25% but in reality it is unlikely to be.  My colleague is not wide of the mark. It was tested by a few others, in different schemes. How could you possibly arrive at that conclusion, without any other relevant facts ?

If this is aimed at me, how about 20 years experience as a LGPS administrator?  

Marcon

sheslookinhot said:

What you have said in your opening sentence is accurate. Every scheme is different. However, It might be "expressed" as 25% but in reality it is unlikely to be.  My colleague is not wide of the mark. It was tested by a few others, in different schemes. How could you possibly arrive at that conclusion, without any other relevant facts ?

Decades of experience!

sheslookinhot

Silvertabby said:

sheslookinhot said:

What you have said in your opening sentence is accurate. Every scheme is different. However, It might be "expressed" as 25% but in reality it is unlikely to be.  My colleague is not wide of the mark. It was tested by a few others, in different schemes. How could you possibly arrive at that conclusion, without any other relevant facts ?

If this is aimed at me, how about 20 years experience as a LGPS administrator?  

No, it isn’t aimed at you.