Pension PCLS

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Hi,

I have a (simple!) query I hope someone can assist with as I didn't find the answer via googling.

I currently have a DB pension and a private SIPP pension. Come retirement day, if I request to withdraw the 25% PCLS cash amount from the DB scheme, will this automatically trigger the 25% PCLS withdrawal on my SIPP pension too, or are they mutually exclusive of each other?


Thanks
Tom

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sidicks said:

Commutation factors I.e. The amount of pension given up for a particular cash lump sum are normally not very generous - if if you took the cash and tried to replace the lower pension by buying an annuity, you'd typically face a large shortfall.

Typically most people take the 25% TFC regardless of the economics of the situation, because they have a desire / need for up front cash - and there's nothing wrong with doing that.

I think therefore, depending how much cash you need (and the relative sizes of your DC and DB pots) you'd be better off maximising TFC from the SIPP and keeping as much of the DB benefit in pension, as far as possible.

Some excellent points made above. To add more context to my initial post, I have accrued a decent non-contributory DB pension from my previous employer. Since the DB pension was zero cost to me, my initial thinking is to access the 25% TFC and enjoy the retirement years (plenty of holidays, driving trips, golf/MTB breaks, always fancied a classic Merc too!) with my wife while we are still alive and healthy! Admittedly, this is a high level retirement plan for now (hence clarifying how to access my pensions), but I will definitely factor in your suggestions come my retirement day.

Thanks
Tom

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Ginge R said:

Tom,

Is your defined benefit pension private, or a public sector one?

Don't underestimate your longevity!

Pensions are no longer lifetime products, a personal pension has estate planning potential.

12:1 factors are going to come under increasing pressure.

Hi Al,

DB = private pension with a Swiss bank. [probably a blur given your multiple client visits, but you kindly came over for a pension assessment last year and offered lots of useful advice to me].

You rightly mention "estate planning" which is one of a few reasons for raiding the 25% TFC from my DB pension, as I had one eye on the inheritance opportunity with our personal SIPP pensions. Luckily we are in a fortunate financial position for our retirement days, but I would still need to weigh up the benefits/numbers to see which best suit our retirement days.

Tom