Defined benefit pension with AVCs - lump sum question

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casameta

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Have got tons of advice here over the years but my first post looking for specific advice for my situation.

I'm 57 and lucky enough to have a defined benefit (DB) pension which will pay approx 15k per annum. I also have AVCs which may be worth 200k at 65, the earliest I can access either. I've been told I can extract a tax free lump sum from my DB and have it paid from my accumulated AVCs, therefore not affecting my 15k pension amount.

My question is.. will taking the DB lump sum from my AVCs then affect my ability to take a 25% tax free cash lump sum from my AVC's. Example scenario below;

If I could take 30k from my DB as a tax free cash lump sum, this could be taken from my AVCs, reducing their value to 170k. Could I then take 25% of the AVCs (50k), either before that withdrawal (so 200k) or after (therefore 170k).

Apologies if this is badly expressed.. I know what I a trying to ask!
 
Forget about the 25% of fund rule - that doesn't apply to AVCs. Your maximum lump sum will be determined by your years of service and salary. When that has been calculated, you can take it from the AVC fund, rather than taking it from the DB scheme.
 
Thanks for the reply, but that's a shock. I always (naively) assumed I could take 25% of AVCs as a tax free lump sum.
 
LDFerguson said:
Forget about the 25% of fund rule - that doesn't apply to AVCs. Your maximum lump sum will be determined by your years of service and salary. When that has been calculated, you can take it from the AVC fund, rather than taking it from the DB scheme.
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I'm in a slightly similar situation to the OP and the statement above re AVCs was interesting. My DB pension with separate AVC fund is deferred as I no longer work for that employer. So just wondering how my tax free lump sum would be calculated on the combined funds? Is it a % of salary when I left the employment for both funds? This would suggest that from a lump sum point of view, I am no better off than someone who didn't make any AVCs over the years.
 
The AVC fund is linked to the main scheme (not a separate pot of money). So your lump sum from the deferred benefit will be calculated based on your service and salary with that employer. Your Final Salary with the employer (say at time of leaving) can be indexed (by CPI) up to when you retire. So the scheme rules may give you a lump sum of say 3/80ths for each year of service. Whether you could use any of the AVC pot to augment the Scheme Lump Sum will in part depend on what other retirement lump sums you might be getting. But obviously having the AVC pot will be of benefit , either by improving your lump sum or by investing into an ARF, from which you can draw down an additional income.
 
DB pension schemes offer you either a pension or a reduced pension with lump sum. Sometimes the amount of pension you have to give up is high for the amount of lump sum you're getting. If that's the case, you can instead use the AVC fund to provide the lump sum, so that you don't need to reduce the pension from the DB scheme.
 
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