Retirement and the Collective Plan

[Downeagle]

I received an income for life figure that I would receive each month plus a tax free lump sum inclusive of the 1% booster and a figure for AVC’s that I have been paying into since the plan began.

I was also given a total amount if I wanted to transfer out of the scheme instead of a monthly income.

I asked if I could take both of the lump sums and transfer out of the scheme and put the money with another pension pot I have and was told if I transferred out the other 2 lumps sums would be taxed after 25%.

I assumed they were both tax free lumps sums as they appeared on the data sheet as tax free unless my lifetime allowance had been exceeded.

I have asked for clarification if these lumps sums are only taxed if I transfer out of the scheme?

[RobertT]

If you take all your RMCPP benefits at the same time, the lump sum(inc booster) and AVC's are used to fund the lump sum alongside the income for life.
It will depend on exactly how they value the pension benefits and how much you have in your pots, but most if not all, will probably be tax free.

But if you transfer out to a defined contribution scheme such as a SIPP, then the rules of that type of pension will apply. So when you subsequently access it, the first 25% will be tax free and regardless of how you take the remainder(all in one go, drawdown or annuity) it will count as income and be taxed accordingly.

Transferring out can be a way to get at your money sooner, which can help to fund an earlier retirement. But only transfer if it's in your best interests to do so, and that will vary with the individual.

[Downeagle]

I assumed that as the lump sum inclusive booster plus the avc’s are tax free I could take that as cash and transfer the income for life to an existing pension pot and pay the relevant tax at the time of drawdown, annuity etc.
However, it would appear I need to take the monthly pension to access the 2 lumps sums tax free.

[RobertT]

The pension, lump sum (inc booster) and AVC's are all connected, when they're within the RMCPP.
But as soon as you transfer out, they become separate pots and so different rules apply.

The only way you could avoid paying tax on the 75% is if your income is below the personal tax allowance(£12,570).