Pension rethink

Crystal_Pixie

Bit of background. 45 and in a good final salary scheme which as of a month ago is valued just over £500k. The scheme is in the black and there is no plans to close it at the moment.


I have a SIPP which I am contributing to £300 a month into and it has about £140k.


No Children and hubby works for the same company and also has the same DB pension.


I was planning to retire at 60 and had a plan to put in as much as I could into my SIPP so I could live off that until I claim my final salary pension at 67.


The valuation of my DB scheme has shocked me - I never thought that I would get to the pension limit but if I stick to my plan of increasing my contributions by 20% a year there is a chance that I might.


Should I re-think my strategy?

AnotherJoe

15 years, there's plenty of time for a crash :-)

The limit is supposedly meant to be raised every year ffromor about a year from now. I'd carry on as you are for a while yet.

The alternative is an ISA but you forgo the tax break. If you are a higher rate taxpayer thats hard to lose. If basic rate then there's a case for putting some in an ISA instead, you lose out a bit but not hugely and gain more flexibility about when you can retire.

kidmugsy

Crystal_Pixie wrote: »

in a good final salary scheme which as of a month ago is valued just over £500k.

What exactly do you mean? Perhaps that twenty times your eventual pension will be equal to £500k?

bigadaj

kidmugsy wrote: »

What exactly do you mean? Perhaps that twenty times your eventual pension will be equal to £500k?

Presumably it's a cetv value but needs clarifying.

jerrysimon

So is the pension payable at 60 or 67 ?

Jerry

TheTracker

A couple aged 45 with £1,140,000 in pensions is in a good position to retire well before 60, assuming a not too extravagant annual expenditure after retirement. The rethinking I'd be doing in your shoes would be to u der stand how much is enough (perhaps retiring at or before 55) and whether I had enough outside pension wrappers to cover any gaps. With a modest drawdown requirement you might have the option to retire in just a few years, if you can save enough money outside the pension. But you haven't told us about other savings (ISAs?), debts (mortgage?), future obligations (children?), aspirations (16k or 60k pa? House downsize/upsize/relocate?) etc.

Crystal_Pixie

bigadaj wrote: »

Presumably it's a cetv value but needs clarifying.

Yes that is CETV.


Thanks for the replies.


I can take my DB pension at 55 but I was advised to leave it as long as possible before redeeming? it. I haven't decided yet if I want to leave it until 67.


I am hoping that the £1m LTA does change.


Other savings - only about £10k in a cash ISA. We have been doing a lot of work to the house. No Mortgage, children and my OH has a DB pension as well.

mgdavid

Crystal_Pixie wrote: »

Yes that is CETV.

Thanks for the replies.

I can take my DB pension at 55 but I was advised to leave it as long as possible before redeeming? it. I haven't decided yet if I want to leave it until 67..............

What is the DB Scheme Normal Retirement Age (NRA)?
What is the DB Scheme's Actuarial Reduction, per year?

kidmugsy

Crystal_Pixie wrote: »

Yes that is CETV.

For purposes of LTA calculations you should ignore CETV entirely unless you actually do transfer out.

Against the LTA a DB pension is valued simply as 20 x annual pension.

Crystal_Pixie

Ok so the CETV would not affect my LTA? That is good news.


From what I can gather the normal retirement age is 65 but I can retire from 55 onwards.


I have no idea about reduction as the Rolls-Royce pension site isn't that sophisticated. I know that if I was to retire at 55 and not take a lump sum then I would get £19k pa if I left it to 60 then that will rise to £27k - I hope that gives you some idea.


My thoughts were to leave the DB scheme until at least 60 and if I did want to retire any earlier (which I might be able to do from some of the feedback I have had) I could use my SIPP.


Pension planning isn't a strong point so all I have been doing is loading as much as I can into my HL SIPP - and it is doing very well.

kidmugsy

Crystal_Pixie wrote: »

I have no idea about reduction as the Rolls-Royce pension site isn't that sophisticated. I know that if I was to retire at 55 and not take a lump sum then I would get £19k pa if I left it to 60 then that will rise to £27k

Oof! That's about 6% they are hauling off for every year early you take it. That gives you a real incentive to delay taking it to as near your Scheme Retirement Age as possible (unless at some point past 55 they tell you that they're going to raise the SRA to (say) 67: you'd rethink at that point.)

Otherwise your current plan seems good, as long as you review it every couple of years to see how things are going, how pension law has changed, and so on: just ordinary, common sense things.

One other thing: if it's relevant it's almost always a good idea to pay enough in pension contributions to let you avoid 40% income tax. Unless complemented by some employer contribution, or achieved by salary sacrifice, contributing to avoid 20% income tax isn't terribly attractive until you pass 55 when the money suddenly becomes available to you and therefore you don't have to weigh up being denied access to it. There's one exception: you want your DC pot to become big enough to be able eventually to pay out enough to let you use your personal allowance fully once you've stopped earning and before you start your DB and State pensions.