TPS, Lump Sum & TFLS

tigerspill · 21 April 2018 at 9:04AM

Hi,

I am trying to understand the TFLS aspect of the lump sum part of the TPS.
Is the 25% calculated on the total value of the pension (20 x yearly payment plus lump sum) or is it 25% of the lump sum only?

The reason I ask is that I believe pensions can be different in this respect. I know that mine (inc. any AVCs) is calculated in the total pension value).

Thanks

Silvertabby · 21 April 2018 at 9:35AM

The maximum tax free cash is 25% of 20 x pension plus 1 x standard lump sum - but - and it's a big but - you then have to factor in the commutation rate, which will reduce both the lump sum and the pension. In the case of TPS, that's 1:12 (ie, you give up £1 of annual pension for £12 lump sum). This link is for the LGPS. It'll work for your TPS main pension as they both use 1:12 - but not for your AVC 'pot'.

How much lump sum would you like to take?

tigerspill · 21 April 2018 at 9:47AM

Silvertabby wrote: »

The maximum tax free cash is 25% of 20 x pension plus 1 x standard lump sum - but - and it's a big but - you then have to factor in the commutation rate, which will reduce both the lump sum and the pension. In the case of TPS, that's 1:12 (ie, you give up £1 of annual pension for £12 lump sum). This link is for the LGPS. It'll work for your TPS main pension as they both use 1:12 - but not for your AVC 'pot'.

How much lump sum would you like to take?

Thanks for this.
I am not sure I understand where the commutation comes in though.
The TPS has a lump sum (initial increasing at 3/80 per year, I cant remember what it is now since 2016 when it changed) as part of its standard benefit along side the yearly amount. I was planning to only take the "standard" lump sum that has built up over the years. I assume that means I dont need to worry about commutation.

Silvertabby · 21 April 2018 at 10:05AM

Up until the change, TPS accrued at 1/80th plus an automatic lump sum of 3 x times the annual pension. Since the change, it's been 1/60th with no automatic lump sum. Very little overall difference - but 1/60th gives you the choice (by commutation) of taking a lump sum or not commuting in favour of keeping the full pension.

If you only intend to take the standard lump sum then, no, you won't be commuting. Your lump sum will be as per your annual benefit statement plus cost of living increases.

tigerspill · 21 April 2018 at 11:32AM

Thanks for the explanation. Think I have now got it.

TPS, Lump Sum & TFLS

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