Examples of taking the Final Pay Tax Free Cash Sum Entitlement via PB+
These examples are expressed in today’s money terms ie the deferred pension is taken at the
31 October 2011 and the pension fund is calculated to age 65 but then an allowance is made
for inflation to show the size of the fund in today’s terms. Provided the basis is the same for
both (today’s terms) it demonstrates the proportions of PB+ fund to TFCS entitlement. The
examples are also based on the assumption that the member retires at 65, that the member
wants the maximum cash available and that the actuarial factors remain unchanged. Actuarial
factors do however change from time to time following changes in expected investment
returns and longevity improvements.
David (aged 50)
Date of Birth
NRD
DJPS
Deferred Pension at 31/10/2011
Pensionable Pay at 31/10/2011
Projected PB+ pension fund
16/08/1961
16/08/2026
28/04/1980
£18,156
£33,014
£104,000
Tax Free Cash From Final Pay
£18,156 x 4.54 = £82,428
Tax Free Cash From PB+
£104,000 x 25% = £26,000
Total Tax Free Cash
= £108,428
In this case the whole of the PB+ (£104,000) can be used as TFCS and then the balance of the
TFCS (£108,428 - £104,000 = £4,428) can be taken from the Plan Pension. Total benefits are
as follows:Final Pay Benefits
Tax Free Cash Sum £4,428
Reduced Plan Pension £18,156 – (£4,428 ÷ 14.30) = £17,846
PensionBuilderplus Benefits
Tax Free Cash Sum £104,000
If there was no option to use the PB+ for Final Pay TFCS then the total benefits will be as
follows:Final Pay Benefits
Tax Free Cash Sum £82,428
Reduced Plan Pension £18,156 – (£82,428 ÷ 14.30) = £12,392
PensionBuilderplus Benefits
Tax Free Cash Sum £26,000
Balance of fund of £78,000 to be used to buy a pension
Jenny (aged 50)
Date of Birth
NRD
DJPS
Deferred Pension
Pensionable Pay at 31/10/2011
Projected PB+ pension fund
16/08/1961
16/08/2026
01/05/1999
£4,513
£21,664
£71,000
Tax Free Cash From Final Pay
£4,513 x 4.54 = £20,489
Tax Free Cash From PB+
£71,000 x 25% = £17,750
Total Tax Free Cash
= £38,239
In this case all of the TFCS (Final Pay and PB+) can be taken via the PB+, leaving the Final
Pay Pension unreduced (ie £4,513) and the balance from the PB+ of £32,761 (£71,000 £38,239) can be used to buy an annuity/income. The total benefits are as follows:
Final Pay Benefits
Unreduced Plan Pension of £4,513
PensionBuilderplus Benefits
Tax Free Cash Sum £38,239
Balance of fund of £32,761 to be used to buy a pension
If there was no option to use the PB+ for Final Pay TFCS then the total benefits would be as
follows:Final Pay Benefits
Tax Free Cash Sum of £20,489
Reduced Plan Pension £4,513 – (£20,489 ÷ 14.30) = £3,080
PensionBuilderplus Benefits
Tax Free Cash Sum £17,750
Balance of fund of £53,250 with which to buy a pension
Jacob (aged 60)
Date of Birth
NRD
DJPS
Deferred Pension at 31/10/2011
Pensionable Pay at 31/10/2011
Projected PB+ pension fund
16/08/1951
16/08/2016
01/09/1972
£17,580
£25,520
£22,700
Tax Free Cash From Final Pay
£17,580 x 4.54 = £79,813
Tax Free Cash From PB+
£22,700 x 25% = £5,675
Total Tax Free Cash
= £85,488
In this case the whole of the PB+ (22,700) can be used as TFCS and then the balance
(£85,488 - £22,700 = £62,788) can be taken from the Plan Pension. The total benefits would
be as follows:Final Pay Benefits
Tax Free Cash Sum of £62,788
Reduced Plan Pension £17,580 – (£62,788 ÷ 14.30) = £13,189
PensionBuilderplus Benefits
Tax Free Cash Sum £22,700
If there was no option to use the PB+ for Final Pay TFCS then the total benefits will be as
follows:
Final Pay Benefits
Tax Free Cash Sum of 79,813
Reduced Plan Pension £17,580 – (£79,813 ÷ 14.30) = £11,999
PensionBuilderplus Benefits
Tax Free Cash Sum £5,675
Balance of fund of £17,025 with which to buy a pension