Revenue limits & defined contribution

[hmmm]

I'm trying to find a straight answer to how the revenue limits on final pensions apply to DC schemes - do they? Because in DC schemes you essentially end up with two/three lump sums, the tax free portion, the AMRF (assumption) and the remainder for an ARF, how do the limits operate?

Because of a generous employer contribution and an early start, I have a very well funded pension, so I could very well hit a point where a 3% deemed withdrawal is more than 66% of my final pension.

 

[LDFerguson]

Assuming at least twenty years' service, the maximum pension is 2/3 final salary, with increases allowed on pensions in payment and spouse's pension of up to 100% of yours. You must not fund for more than this level in a DC scheme.

How you then choose to take your benefits (lump sum, annuity, AMRF, ARF) does not have a bearing on the above overall limits.

Liam D. Ferguson
www.ferga.com

 

[hmmm]

Assuming at least twenty years' service, the maximum pension is 2/3 final salary,http://www.ferga.com

OK but what's a "pension" defined as for a DC scheme. As I can choose to draw an income by selling assets in an ARF at my own timing, is it that I cannot draw more than 2/3 final salary a year by selling ARF assets?

 

[LDFerguson]

For the purposes of calculating maximum allowable fund, it is assumed that you will be buying an annuity at retirement, regardless of whether or not you actually do.

If you haven't over-funded and buy an ARF, you can withdraw an income far greater than 2/3 final salary if you like, subject to tax and usual AMRF rules. The funding checks only apply up to the point you make your decisions about what form your post-retirement benefits are going to take.

 

[hmmm]

For the purposes of calculating maximum allowable fund, it is assumed that you will be buying an annuity at retirement, regardless of whether or not you actually do.

Ah ok thanks, that was the bit I was missing.