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new pension rules

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janela | 20:45 Fri 10th Mar 2006 | Business & Finance
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When the new pension rules come in april 2006 it will be possible to take as a lump sum 25% of the pension value. How do you calculate the value of a final salary pension.
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Most final salary schemes I have come across pay a lump sum (usually 3 times the annual pension) anyway so there will be no need to calculate values.


For those that don't there will be a formula for calculating the value taking into account the annual pension, any guaranteed increases and life expectancy. The Scheme administrators will be responsible for working it out.

For the purposes of checking against the maximum allowed value (currently �1.5 million), multiply the annual pension by 20 and add any lump sum. I'm not sure that you can take 25% of that as a lump sum, though, it will depend on the scheme's rules.

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