Final Salary Pension

[sammmo]

If I take a lump sum out of my final salary pension is the lump sum taxable?

[dozydai]

Its is not taxable

[New Judge]

Any lump sum payable under a final salary pension scheme is not taxable. However, current rules state that you can take a maximum of 25% of your notional "pension pot" as a lump sum. Becasue final salary schemes do not have a "pot" in the same way as a money purchse scheme does final the value of the pot is usually calculated by taking any normal lump sum due and adding twenty times the annual penaion payable upon retirement. (Twenty years is the ball park figure that actuaries use as average life expectancy). So if your scheme would pay (say) a lump sum of £30k and a £10k pension, your pension pot is £230k. So the maximum you could take as a lump sum would be £57.5k.

[Peter Pedant]

You should tax as large a un-taxed lump sum as poss
since it is tax-free - usually 25% ( V.G.) and it is up front

because otherwise you commute it to a larger pension - which is taxed.
not very good at all.

the cross over point ( time at which it was better to take the larger pension was ... 19 y )