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Playing DC vs DB games
Sterlingtimes
Posts: 2,548 Forumite
Now that the drawdown rules are becoming far more flexible does it make sense to draw income from the DC before invoking the DB.
Suppose my DB offers £13,333 at age 65 and (25% less) £10,000 at age 60, ignoring inflation and interest, by taking my DB at age 60 I would accumulate £50,000 in cash by the age of 65. That could buy me an annuity of £50,000 * 0.0295 (RPI, 50% for wife, 5 year guarantee) = £1,475.
In simple terms I appear to be £3,333 - £1,475 = £1,858 per month better off in cash grabbing from my DC before my DB.
Does it make sense to do this (assuming average life expectancy?
Suppose my DB offers £13,333 at age 65 and (25% less) £10,000 at age 60, ignoring inflation and interest, by taking my DB at age 60 I would accumulate £50,000 in cash by the age of 65. That could buy me an annuity of £50,000 * 0.0295 (RPI, 50% for wife, 5 year guarantee) = £1,475.
In simple terms I appear to be £3,333 - £1,475 = £1,858 per month better off in cash grabbing from my DC before my DB.
Does it make sense to do this (assuming average life expectancy?
I have osteoarthritis in my hands so I speak my messages into a microphone using Dragon. Some people make "typos" but I often make "speakos".
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Comments
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Generally speaking it is best to take your DB pension at the default date when the payment is guaranteed. So if you need to finance a gap between retirement and the DB pension reaching its due date it is best to look for the cash elsewhere. This is in my view an excellent use of the proposed flexibility in DC pension funds.0
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... the DB pension reaching its due date it is best to look for the cash elsewhere. This is in my view an excellent use of the proposed flexibility in DC pension funds.
Thank you for your super quick response. That is what is thought. Very helpful!I have osteoarthritis in my hands so I speak my messages into a microphone using Dragon. Some people make "typos" but I often make "speakos".0 -
Generally speaking it is best to take your DB pension at the default date when the payment is guaranteed. So if you need to finance a gap between retirement and the DB pension reaching its due date it is best to look for the cash elsewhere. This is in my view an excellent use of the proposed flexibility in DC pension funds.
Totally ditto this- whack as much as you can into a DC pension before you want to retire. Also, if you have the option of no LS and a higher pension with your DB pension, do that and use the DC pension for the LS too.0 -
Totally ditto this- whack as much as you can into a DC pension before you want to retire. Also, if you have the option of no LS and a higher pension with your DB pension, do that and use the DC pension for the LS too.
Thank you, it is pleasing that we are on the same wavelength.I have osteoarthritis in my hands so I speak my messages into a microphone using Dragon. Some people make "typos" but I often make "speakos".0 -
I am just happy I am on someone's wave length.
Have had a lot of incoming flack today lol0
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