Lump sum calculation

[goldy2007]

How is the lump sum calculated for section c members
Or do you not find out until you apply for nra60
Any help welcome

[mr hil.]

Whatever the annual figures are for your nra60 multiply by 20, add any AVCs you may have then 25% of that figure is the maximum tax free lump sum you can take . Any amount you do take though will reduce your annual pension unless funded by your AVCs

That will give you a very rough idea of your Max lump sums but it can get very complicated. If your close to retirement you can ask for a quote

[goldy2007]

Many thanks is the formyla the same Nra65

[freespeech]

Whatever the annual figures are for your nra60 multiply by 20, add any AVCs you may have then 25% of that figure is the maximum tax free lump sum you can take . Any amount you do take though will reduce your annual pension unless funded by your AVCs

That will give you a very rough idea of your Max lump sums but it can get very complicated. If your close to retirement you can ask for a quote

Spot on but worth a reminder that the max lump sum (PCLS) "could" change in the budget on November 26th.......

[RobertT]

Mr hils method only really works if you have no AVC's or your AVC's equal less 25% or less than pot value.
If they add up to more than 25%, a different calculation is required.

For example:

An Age60 pension of £6k per year will give a pot value of £120k(6x20), so someone with no AVC's can take a tax free lump sum of £30k leaving a pension of around £4.5k(assuming a 1:20 commutation rate).

If you have £20k in AVC's, the pot value would be £140k, giving a lump sum of £35k made up from the £20k in AVC's and commuting some pension(roughly £750) to create the other £15k.

If you have £60k in AVC's, that would give a pot value of £180k, theoretically meaning £45k in tax free cash. But as the tax free lump sum can only be 25% of pot value and the pension element is only worth £120k, that means the lump sum is limited to £40k, with the remaining £20k in AVC's being either paid out as a UFPLS(1st 25% also tax free) or transferred out.

The same maths would apply to Age65 benefits assuming you're using the DBCBS to fund the tax free lump sum.
But if you decide to give up some pension to fund that instead, all of the DBCBS will be paid out as a UFPLS.


*UFPLS – Uncrystsalised Funds Pension Lump Sum.
*Commutation Rate – The amount of lump sum you get for giving up £1 of annual pension.

[goldy2007]

Thanks for the helpful insight Robert

[heapsy]

Whatever the annual figures are for your nra60 multiply by 20, add any AVCs you may have then 25% of that figure is the maximum tax free lump sum you can take . Any amount you do take though will reduce your annual pension unless funded by your AVCs

That will give you a very rough idea of your Max lump sums but it can get very complicated. If your close to retirement you can ask for a quote

Spot on but worth a reminder that the max lump sum (PCLS) "could" change in the budget on November 26th.......

Further to the above answer, I take it that the supplement is added to the yearly pension, assuming you've left the business?

[RobertT]

My understanding is if you've already left RM, the supplement is included in the calculations when working out the tax free cash.

If you're planning on leaving at the point of taking your pension, then you might have to clarify the situation with the pension people.