Making up the lump sum

[Wullie10]

At 60 I presume AVC makes up the majority of a tax free lump sum. What after that ? Is it the cash balance or a percentage of your pension , (im section C ) or a mixture of both ? Can you use all cash balance before pension is touched ?

[heapsy]

Hello. I'm in the same boat mate. Section C with AVCs. My AVCs wont cover all the lump sum. I've also had to reduce the payments to stay within PSE So one option is to take some of you lump sum from the main pension pot. This would reduce your monthly slightly. It has been mentioned on here that you might be able to use some of the Cash Balance scheme to make up your lump sum figures. Very useful for the likes of you and me, in section C and who wont get the full 25% from the AVCs. RobertT has a better understanding than myself, he may come back with more info later.
Don't forget, the next uplift in benefits will be 5%. In my case somewhere north of £8,000. 25% of this will be £2,000 plus, so exact figures will vary from person to person.

[freespeech]

At 60 I presume AVC makes up the majority of a tax free lump sum. What after that ? Is it the cash balance or a percentage of your pension , (im section C ) or a mixture of both ? Can you use all cash balance before pension is touched ?

In section C there is no "automatic" lump sum but some of the pension can be given up in exchange. If you take that option then the LS will consist of all of your AVC's (if they are below the total tax free value) and some of the cash balance fund. A rough calculation is that each £20000 of lump sum is a £1000 reduction per year in pension (so after 20 years you are worse off).

[RobertT]

At 60 I presume AVC makes up the majority of a tax free lump sum. What after that ? Is it the cash balance or a percentage of your pension , (im section C ) or a mixture of both ? Can you use all cash balance before pension is touched ?

The idea of AVC's is to fund the tax free lump sum, so you don't have to give up any pension to get one, which is particularly good for section C members.

But for those people who are determined to take the maximum lump sum possible, I think you can take the full 25% tax free lump sum from your main NRA60 benefits, obviously giving up some pension in the process.
Then taking your AVC's as a Uncrystalised Pension Funds Lump Sum, which means the first 25% of that will also be tax free.

As the RMPP are responsible for some inflationary increases to RMSPS benefits, some DBCBS can also be attached to NRA60. That could also be paid as a UFPLS if you chose to take it that way. Otherwise, the majority of the DBCBS can be used with NRA65.

It is possible to transfer out the DBCBS and AVC's to a personal pension and accessed from there. Although you could be giving up valuable tax free status of that money, in the process.

[Hyrrokkin]

At 60 I presume AVC makes up the majority of a tax free lump sum. What after that ? Is it the cash balance or a percentage of your pension , (im section C ) or a mixture of both ? Can you use all cash balance before pension is touched ?

The idea of AVC's is to fund the tax free lump sum, so you don't have to give up any pension to get one, which is particularly good for section C members.

But for those people who are determined to take the maximum lump sum possible, I think you can take the full 25% tax free lump sum from your main NRA60 benefits, obviously giving up some pension in the process.
Then taking your AVC's as a Uncrystalised Pension Funds Lump Sum, which means the first 25% of that will also be tax free.

As the RMPP are responsible for some inflationary increases to RMSPS benefits, some DBCBS can also be attached to NRA60. That could also be paid as a UFPLS if you chose to take it that way. Otherwise, the majority of the DBCBS can be used with NRA65.

It is possible to transfer out the DBCBS and AVC's to a personal pension and accessed from there. Although you could be giving up valuable tax free status of that money, in the process.

I was thinking of doing that - looks like it might not be a good idea...

[RobertT]

It is possible to transfer out the DBCBS and AVC's to a personal pension and accessed from there. Although you could be giving up valuable tax free status of that money, in the process.

I was thinking of doing that - looks like it might not be a good idea...

It might be a good idea, or it might not be. It depends on your plans!

Generally it's best to take your AVC's with your NRA60 benefits, as most people's AVC's will total less than 25% of pot value. Therefore they will be tax free!

But some people might want to use their AVC's to fund early retirement, without touching their main benefits. In which case transferring might be a good choice.
The first 25% would be tax free and as long as you don't drawdown more than the personal allowance(currently £12,570) in any tax year, that will be tax free too, providing you have no other income.

The DBCBS is predominantly attached to NRA65 benefits and is designed to fund the lump sum with them. But that could be used in a similar way to above, if it's right for you.