I

[Alan1]

I am 55 next year and have a pension forcast of about 1500 per annum. I want to take a lump sum of the whole amount. Any ideas ?

[fiction-factory]

Any ideas on what. On how much lump sum you might get?

[fiction-factory]

Will you still be working/paying tax after you draw this?

[Alan1]

Yes this I'd a company pension that I had back in 1992. I still have a LGPS pension that I cannot draw until 67. I am still working and guess I will be until then

[ToraToraTora]

at 55 you can take it at any time 25% tax free and the rest added to your income for that year and taxed accordingly. Do you know if it's money purchase or final salary?

[fiction-factory]

You need to ask the company for a lump sum value. Could be roughly £50K gross but it depends on so many things- eg is yours index linked, are there spouse benefits..?
25% would be tax free. The rest would be taxed at marginal rate - could be 40% initially

[Alan1]

It's final salary scheme

[fiction-factory]

Some will offer an Enhanced Transfer Value just to get it off their liabilities/to reduce risk - ask for a value

[fiction-factory]

Is the £1500 forecast what they have said you'd get at 55- or is that what you would get at 60?

[ToraToraTora]

ok alan then there will be a notional cash value that represents what it would take to buy an annuity to cover the benefits quoted. So as FF says get the value that value and go from there.

[Hymie]

I would say that fiction-factory’s estimate of your pension lump some value to be on the high side.

Pension companies work out how much money they would need to pay out your annual pension. They do this for all in the pension scheme – that way they can work out whether there is enough money in the scheme to pay all liabilities.

To turn your annual pension into an amount of money that they are willing to pay you, they use something called a commutation rate. The pension company is free to assign any value it chooses to this rate, a low rate would be 10 and a high rate 20 (even where the pension is indexed linked and there are other benefits such as a spousal pension).

So a £1.5k/annum pension could have a total pension pot value of up to £30k, but a value of around £20k is more likely.

[fiction-factory]

That's fine at age 65 but he's 55 hymie

[Hymie]

As this is a deferred final salary pension with no further monies being paid in – the scheme would have advised of the expected pension pay out at scheme’s normal retirement age (this is likely to be 65 given the age of the scheme).

If the OP was to ask the pension scheme how much this £1.5k p.a. (at 65) would be at 55 – I would guess a reduction of around 30-40% would be applied, giving a pay out of around £1k p.a.

However a commensurate increase in commutation rate would be applied, as the notional pot of money required to pay out the pension is the same regardless of the age at which the pension is taken.

[fiction-factory]

Yes, I asked allen if this was the pension payable at age 55 or age 65 but haven't had a response yet. I still think that if it is the amount payable at 55 and if it would be index linked you'd need an annuity of £50000 or more based on life expectance of 85-90.
But the amounts vary.
Hopefully allen will ask and let us know the value

[fiction-factory]

Sorr- Alan not Allen

[fiction-factory]

I thought this thread sounded familiar. The position seems to be the same as it was in February - we still don't have enough info
https://www.theanswerbank.co.uk/Business-and-Finance/Question1646793.html