### USS pension tax-free lump sum

Posted:

**September 11th, 2019, 12:12 pm**I am a deferred member of the Universities Superannuation Scheme (USS). I plan to take the pension in 2020 when I am 55.

I have a defined benefit pot (Income Builder) of £11,100 per year (maximum pension option), with a crystallised value of £222,000 (20 X annual pension)

I also have a defined contribution pot (Investment Builder) of £145,000

I thought I was entitled to a tax-free lump sum of 25% of my total pension (£222,000 + £145,000 = £367,000). This would amount to £91,750 tax-free.

I thought I would then be able to take the balance of my DC pension (£145,000 - £91,750 = £53,250) as a taxable sum (or leave it in the Investment Builder for later taxable withdrawals).

However, I am told by USS that this is not possible, for reasons I don't fully understand. Among the options offered to me is that I take approximately £82,000 tax-free while I convert the remaining part of my DC pot into an annual pension at an extortionate commutation rate of 47.08.

This would increase the crystallised value to a level where £82,000 is exactly 25% of the total pension, but the cost to me is having to buy the equivalent of a poor-value annuity.

Can anybody explain to me why I cannot take 25% of the total pension tax-free and the balance of my DC pot as a taxable sum?

I have a defined benefit pot (Income Builder) of £11,100 per year (maximum pension option), with a crystallised value of £222,000 (20 X annual pension)

I also have a defined contribution pot (Investment Builder) of £145,000

I thought I was entitled to a tax-free lump sum of 25% of my total pension (£222,000 + £145,000 = £367,000). This would amount to £91,750 tax-free.

I thought I would then be able to take the balance of my DC pension (£145,000 - £91,750 = £53,250) as a taxable sum (or leave it in the Investment Builder for later taxable withdrawals).

However, I am told by USS that this is not possible, for reasons I don't fully understand. Among the options offered to me is that I take approximately £82,000 tax-free while I convert the remaining part of my DC pot into an annual pension at an extortionate commutation rate of 47.08.

This would increase the crystallised value to a level where £82,000 is exactly 25% of the total pension, but the cost to me is having to buy the equivalent of a poor-value annuity.

Can anybody explain to me why I cannot take 25% of the total pension tax-free and the balance of my DC pot as a taxable sum?