Lump Sums

Many schemes provide an opportunity for you to get a tax free lump sum out of your scheme on retirement. Some give it to you automatically; in others you can forfeit some of your pension to get a lump sum.

A lump sum of up to one and a half times your final year's earnings is tax free. There are no general rules about whether it is worth giving up part of your pension in order to get a lump sum. You should take account of the fact that the pension is taxable, whereas the lump sum is tax-free.

But remember that the price of a lump sum is a reduction in your pension which will make you worse off each month until you die.

Many people have used additional voluntary contributions as a way of boosting their lump sum rather than their pension. That is no longer possible for new schemes. But if you are already in a scheme it is a very worthwhile way of bypassing the tax on earnings in your last few years of work.

More information - Early And Late Retirement

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Early And Late Retirement

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