Potential Tax free Lump Sum

[RobertT]

Or can I take the excess £12000 and simply pay tax on it? And at what rate , 20 or 40%?

Yes, I said in an earlier post today that you could use your DBCBS to make up your lump sum to 25% and the rest would be taxable.

Income Tax would be paid at your marginal rate. So going by current rates, anything you earn over £46,351 in any tax year would be taxed at 40%. The £12k you mention would be classed as income.

At present I am planning to take NRA 60 and 65 at 60.

You'll have to factor in a 25% reduction on your NRA65 benefits then.

[stephen500]

Or can I take the excess £12000 and simply pay tax on it? And at what rate , 20 or 40%?

Yes, I said in an earlier post today that you could use your DBCBS to make up your lump sum to 25% and the rest would be taxable.

Income Tax would be paid at your marginal rate. So going by current rates, anything you earn over £46,351 in any tax year would be taxed at 40%. The £12k you mention would be classed as income.

At present I am planning to take NRA 60 and 65 at 60.

You'll have to factor in a 25% reduction on your NRA65 benefits then.

I have thanks and around 16% deduction for taking max lump sum for this one.

[RobertT]

Stephen you seem to have got yourself and me confused here. I simply don't understand where you've got this 16% deduction from!

To work out the value of your total pot:

Add the value of your pensions together and multiply by 20. Then add on your standard lump sum/s and your DBCBS pot, plus any AVC's.

Purely for example purposes:

NRA60 = 10,000 x 20 = £200,000
NRA65 = £3,000 x 20 = £60,000
Lump sums = £40,000 + £20,000
DBCBS = £16,000

All that equals a total value of £336,000

The maximum lump sum you can take is 25% of that total, so £84,000.

The standard lump sums and the DBCBS add up to £96,000, therefore you have £12,000 excess.

You could take that as taxable cash. Or I believe as stated up thread that section B members also have the option of commuting some standard lump sum to get a bigger pension. So you could effectively use the £12,000 for that.

See page 12 of your plan guide for a bit more info on working out your pension value.

[stephen500]

Stephen you seem to have got yourself and me confused here. I simply don't understand where you've got this 16% deduction from! .

The 16% reduction is the yearly pensions I receive after taking the max lump sums.
Currently in my illustration my FS pension shows as £9430 (2018) however if I take my max lump sum this is reduced. Based on previous illustrations, which show reductions if a member takes the max lump sum, this works out around 15%. So for my FS lump sum (not taking the DBCS into account) my FS pension falls to around £8015 (not allowing for future pay increases) and my CSDC scheme yearly pension of £2613 falls to £2221 with the same reduction for the same reason. So the reduction, I am talking about is the reduction in pension, when I take the max, instead of min lump sum. "Pension after taking max lump sum"

[Hawkey99]

Can someone please confirm if this is the correct calculation.

A section B member has an NRA 60 pension of £9229 plus a lump sum of £61,470.

Can you confirm if the whole lump sum would be tax free and if it isn't can they commute some to extra pension.

Is this correct

£9220 x 20= £184,400 plus £61470 = £245,870

£245,870 divided by 4 = ££61,467

Many thanks

[Driver74]

Don’t know about the calculations but your lump sum is definitely tax free but you can also take a lower lump sum and more pension but very few people do that

[RobertT]

The lump sum equals 25% and is tax free!

The way I understand section B is that there is the opportunity to commute some lump sum to get a bigger pension. But as has been said, not many people do so.

[Hawkey99]

Is there a different rate of increase in pensions between section B & C each year.

Thanks

[RobertT]

Is there a different rate of increase in pensions between section B & C each year.

Thanks

Yes. The pensions website will tell you more!

[stephen500]

Is there a different rate of increase in pensions between section B & C each year.

Thanks

Yes. The pensions website will tell you more!

I don't think the increase are because RM loves B more than C, but more likely to legal issues.

[RobertT]

Once in payment, Section B pensions increase with CPI. While section C increases with RPI, which is usually higher.