Waive right on future pension lump sum decision

C

Cicobr

Registered User
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I am in a DB scheme and also have a decent pot of 350k within an Avc pension scheme . I Am about to get an ex gratia payment of approx 200k . The choice is to make waiver or not and the take home difference is approx 45k as no waiver means the scsb is being reduced by 105k being today’s value of future tax free pension lump sum. Waiving means the 200k is nearly fully tax free . Just 16k tax.
The questions I have are
1 if I waive am I waiving to both schemes , dB and avc
2 I presume I am just waiving the right to the tax free element of a future retirement lump sum or is it the ability to get a future retirement lump sum .
3. What tax rate will any retirement lump sum be taxed at if I have waived
4 if I don’t waive what is the tax position on any future lump sum out of say the AVC fund, say it was 180k.
 
I can answer some of your questions:
1. My understanding is that you are waiving your entitlement to a tax free lump from the pension from the employment you are leaving. Thus is both your DB and AVC are from the same employment then you are waiving your right to a tax free lump sum from both. However if you transferred some benefits in from a previous employment then a lump sum from this amount wound not be included in your waiver and you would need to apportion it.
2. You are waiving your right to a lump sum and not just the tax free element.
3. You won't get a lump sum. All drawdowns taxable at your marginal rate which you may be able to manage depending on what retirement pensionoption you take - ARF, annutiy or other;
4. If you don't waive my understanding is that the first €200K is tax free subject to it being less 25% of your fund with a lower rate on an amount between €200K and €400K.

I'm not a pensions specialist so this is my understanding from a tax viewpoint.
 
Presumably as above, the AVC is additional to your existing main DB scheme.

You would not be waiving the right to a lump sum from the scheme. You would be waiving the right to receive it tax free. Even if you waive the tax free option, you could take the lump sum and pay tax on it at your marginal rate at drawdown.

You can take a maximum of 25% of a fund as a lump sum. This is first calculation.
Of this 25%, 200k can be taken tax free ( lifetime limit).
The difference between 200k and 500k can be taken and taxed at 20%.

You are in a DB scheme, so you presumably have option to move the main DB scheme transfer value to an ARF. Is this your idea ? Or are you taking a monthly pension and then looking at the avc fund for a lump ? You have many options, which should be outlined in an options statement from the pension administrators.
 
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