Small pension section c

tyketkd · Post by **tyketkd** » 16 Sep 2018, 11:59

Hello I had two small periods of RM employment and receive two section C benefit illustrations NRA60. One has current value of pension £701.28 and the other £29.38
I'm 49 yrs old and work full time but trying to calculate the 25% tax free lump sum at 55. Is it 20x the combined current value of pension ((701.28+29.38) / 4) So £3653.30 or is my calculation wrong?!

Thanks in advance.

Post by **RobertT** » 16 Sep 2018, 12:27

The combined unreduced yearly pension at age 60 would be £730.66. I assume that's based on your most recent statements, but in practice that should be increasing each year with inflation.

As a rough guide the total value of your 'pot' is 20x that amount, so £14,613. But that is based on taking it at NRA.

So if taking all of your pension early expect a 5% per year reduction. Meaning that taking it all at 55, your 'pot' will be worth about £10,960 and so a lump sum of around £2,740 and a yearly pension of about £410.

*All calculations give you ballpark figure rather than an exact one.

Post by **hantsman** » 16 Sep 2018, 12:31

tyketkd wrote:Hello I had two small periods of RM employment and receive two section C benefit illustrations NRA60. One has current value of pension £701.28 and the other £29.38
I'm 49 yrs old and work full time but trying to calculate the 25% tax free lump sum at 55. Is it 20x the combined current value of pension ((701.28+29.38) / 4) So £3653.30 or is my calculation wrong?!

Thanks in advance.

I have a small deffered Section C pension, £1000 a year aprox, no mention of a lump sum, not sure why you would want to claim this early from 55 yrs of age though, (Taxman allows this) I would defer mine when I reach 60 but I believe I can't & I will have to take the payments!

tyketkd · Post by **tyketkd** » 16 Sep 2018, 12:45

Thanks for the replies, can I take the 25% at 55 only and leave the balance until 60? Or are you forced to receive a pension each year from 55 if you take 25%? Simple questions but I'm simple and don't have the answers!

Thanks

Post by **RobertT** » 16 Sep 2018, 12:51

hantsman wrote:I have a small deffered Section C pension, £1000 a year aprox, no mention of a lump sum, not sure why you would want to claim this early from 55 yrs of age though, (Taxman allows this) I would defer mine when I reach 60 but I believe I can't & I will have to take the payments!

Section C don't get a lump as standard but get the chance to give up some pension to get one. This thread gives an idea of the options you have.

If you take your pension early it gets reduced. If you don't take it at NRA it doesn't increase other than by inflation, which it would do in payment anyway.

There have been cases of people who have deferred their pension past NRA by choice or because they've moved house and didn't tell the pensions dept, etc. Infact some people have gone to the pensions ombudsman when they realised their mistake, and lost their case!

Post by **RobertT** » 16 Sep 2018, 12:51

tyketkd wrote:Thanks for the replies, can I take the 25% at 55 only and leave the balance until 60? Or are you forced to receive a pension each year from 55 if you take 25%? Simple questions but I'm simple and don't have the answers!

Thanks

If you take the lump sum you have to take the pension aswell.

tyketkd · Post by **tyketkd** » 16 Sep 2018, 13:03

Thanks Robert much appreciated.

Post by **hantsman** » 16 Sep 2018, 13:07

RobertT wrote:
hantsman wrote:I have a small deffered Section C pension, £1000 a year aprox, no mention of a lump sum, not sure why you would want to claim this early from 55 yrs of age though, (Taxman allows this) I would defer mine when I reach 60 but I believe I can't & I will have to take the payments!
Section C don't get a lump as standard but get the chance to give up some pension to get one. This thread gives an idea of the options you have.

If you take your pension early it gets reduced. If you don't take it at NRA it doesn't increase other than by inflation, which it would do in payment anyway.

There have been cases of people who have deferred their pension past NRA by choice or because they've moved house and didn't tell the pensions dept, etc. Infact some people have gone to the pensions ombudsman when they realised their mistake, and lost their case!

Many thanks Robert,

just received my annual September 'current value' statement of my Age60 benefits.

BAP £637.06
Pension Supplement (Payable until my SPA which is 67 £146.09
Pension increase amount £154.28 RPI used I think?
Current Value £937.43

I have left RM employment so I will receive the Pension Supplement until age 67 (I Would rather have had all my earnings pensionable)

I'm assuming tax might be the reason people might leave it until after 60,

Post by **RobertT** » 16 Sep 2018, 13:34

hantsman wrote:Many thanks Robert,

just received my annual September 'current value' statement of my Age60 benefits.

BAP £637.06
Pension Supplement (Payable until my SPA which is 67 £146.09
Pension increase amount £154.28 RPI used I think?
Current Value £937.43

I have left RM employment so I will receive the Pension Supplement until age 67 (I Would rather have had all my earnings pensionable)

I'm assuming tax might be the reason people might leave it until after 60,

Yes, you'll get the supplement until SPA which is a section C thing. Section A/B haven't got a supplement but more of their earnings were/are pensionable.

Your pension will count as income, so tax might have to be paid on it depending on what other income you have. But it may well be taxable when you get to SPA and beyond aswell.

If you defer it, you'll have lost what you would have been entitled to during that period of time.

Post by **hantsman** » 16 Sep 2018, 19:01

I might well take the biggest lump sump I can from section C, 25% if allowed. Im 57.5 yrs old.

I also have a previous deferred AA final salary scheme payable at 65, £12000 PA if no lump sum.

Another 4.5 yrs NI contributions for the new state pension, plus I might well get another £6000 NHS DB pension if I work until 67 lol.

So tax is going to be a concern.

Post by **rambo1** » 16 Sep 2018, 21:07

hantsman wrote:I might well take the biggest lump sump I can from section C, 25% if allowed. Im 57.5 yrs old.

I also have a previous deferred AA final salary scheme payable at 65, £12000 PA if no lump sum.

Another 4.5 yrs NI contributions for the new state pension, plus I might well get another £6000 NHS DB pension if I work until 67 lol.

So tax is going to be a concern.

Would it not be better to take a max lump from your AA pension and cut the tax you pay on your annual pension from it? If you invest it wisely you'll be getting income from the lump sum and if its in an ISA product, it'll be tax free. Or if you have any debt, pay it down.