When should he take his DB pension?

Terry_Towelling

As stated in a previous post, I can't really offer you anything connected with the technicalities of tax efficiency but that is surely of secondary importance to the real-life story that you are both living out.

If there is a suggestion of shorter than normal life-expectancy, doesn't that scream out a warning to start reaping the benefits of all those 'sacrifices' made in the name of later-life security - sooner rather than later?

You can't avoid tax; you may be able to reduce it but to what end? I can't see it making any material difference to your lives. The longer you leave it to crystallise benefits, the larger will loom the LTA issue. The longer you leave it to draw benefits the more you will deplete your cash reserves. The longer you leave it, the less time you will have to spend and enjoy. It seems that your OH has already worked out how to derive enjoyment simply by working and saving (fair enough) but that is at odds with your view. Unless you can find a crossover point in your views, one of you is going to be unhappy.

Surely the only way to reduce tax is to take TFPLS on all schemes and hope to live longer whilst spending less in each tax year to keep below key thresholds? But (barring long-term care) you are never going to be able to spend it all anyway, so it then becomes a question of inheritance amounts - and that brings the threat of IHT.

Like they say, the only two certainties are death and taxes - perhaps don't spend too much time trying to avoid the latter lest the former decides it's time to cash in.

I think you probably have exactly the right idea of how to live but how are you going to break the addiction to work of your OH?

cloud_dog

kidmugsy wrote: »

Its worth checking that assumption. In my principal DB scheme I took max commutation and yet my widow's pension lost not a penny.

Just to second this, this aspect is also true in my DB scheme. Not claiming yet but the documentation supports this.

crv1963

DairyQueen wrote: »

We have taken advice from IFAs on specific issues in the past and are not averse to doing so now. However, how we take income from various sources (limited company and pensions) is quite convoluted because of OH's decision to move to self-employment. We will probably refer our plan to an IFA for a sensibility check before actioning it.

IFA when you need it is a good idea IMHO. I think that you have a twofold problem.


i) a workaholic husband who may or may not want to retire, if self employed and enjoying it he may carry on for "just one year more" not being motivated by retirement but by playing the savings/ investment game. Or maybe he just doesn't know what he'll do with his time?


ii) how to change the habit of a lifetime- going from saver to spender. Will seeing savings totals fall sit well?



The answer to the first may be to find an outlet for his talents- Parish Treasurer, Charity back room boy- given it's big business an accountant on board somewhere must surely be welcomed. It may be worth discrete digging around? Keep his mind going in his comfort zone?


The answer to the second is more difficult, taking longer/ more varied holidays now, or finding a hobby car (I think I read somewhere you both like nice newish cars) such as a Lotus- wide social circle as well if you want it.


Best wishes

crv1963

The commutation rates on his DB are x17 at age 62 and x15 at age 65 but I believe that the widows' pension will be reduced proportionately if he takes any TFC.

My wifes widows pension will not be reduced if I take a larger lump sum, anything I do doesn't affect her pension as the widows pension is not mine to touch. It is my pension that will be reduced if I take a larger lump sum.

DairyQueen

Thanks again for all your helpful replies.

I have checked with OH and he is sure that the widow's pension will also be reduced if he takes any TFC. Next step is to tackle OH (to the floor) and insist that he coughs the policy docs. I suspect that they are somewhere in the depths of his filing system.

Audaxer

DairyQueen wrote: »

I have checked with OH and he is sure that the widow's pension will also be reduced if he takes any TFC. Next step is to tackle OH (to the floor) and insist that he coughs the policy docs. I suspect that they are somewhere in the depths of his filing system.

To check whether the widow's pension is affected by taking a lump sum, I would have thought you would be able find details of the DB pension conditions online if it is a reasonably big pension scheme.

luckyfool151

Was he smart enough to get a protection certificate of any sort? Not that it is going to impact things hugely, just curious.

DairyQueen

crv1963 wrote: »

IFA when you need it is a good idea IMHO. I think that you have a twofold problem.


i) a workaholic husband who may or may not want to retire, if self employed and enjoying it he may carry on for "just one year more" not being motivated by retirement but by playing the savings/ investment game. Or maybe he just doesn't know what he'll do with his time?


ii) how to change the habit of a lifetime- going from saver to spender. Will seeing savings totals fall sit well?



The answer to the first may be to find an outlet for his talents- Parish Treasurer, Charity back room boy- given it's big business an accountant on board somewhere must surely be welcomed. It may be worth discrete digging around? Keep his mind going in his comfort zone?


The answer to the second is more difficult, taking longer/ more varied holidays now, or finding a hobby car (I think I read somewhere you both like nice newish cars) such as a Lotus- wide social circle as well if you want it.


Best wishes

Thanks for a thoughtful reply.

OH loves working to the point where I think his identity is so shaped by his professional life that he is struggling to let go of something that provides much of his self value. He has been a corporate FD for most of his career and it will be tough for him to find an alternative within that comfort zone.

He has suggested mentoring students at our local uni., or becoming involved with the magistracy, but he spends much more time discussing work than life-after work. His interest in retirement stretches as far as window shopping for homes and future travel plans.

He has reluctantly agreed to take most Fridays off but I doubt that will happen. I am more optimistic that he will embrace the holidays I am busily planning. He isn't reluctant to spend money except from the pension. Possibly because once he takes that first step he can no longer remain in denial about the inevitable end of his working life. Retirement is going to be a tough transition for him.

Optimising income tax is part of my plan. He is very motivated by saving tax so this is likely to be the trigger that catalyses that all-important first pension withdrawal. Thus my OP.

DairyQueen

Audaxer wrote: »

To check whether the widow's pension is affected by taking a lump sum, I would have thought you would be able find details of the DB pension conditions online if it is a reasonably big pension scheme.

Yep, tried this. The (private sector FTSE 350) company has closed its DB scheme so all current members are deferred. All online references are to its current DC plan.

DairyQueen

luckyfool151 wrote: »

Was he smart enough to get a protection certificate of any sort? Not that it is going to impact things hugely, just curious.

Yes. He's smart and also meticulous about anything tax-related. He has 2016 protection so has a way to go before he hits the ceiling. On current valuation, and DB valued at age 65, he is just short of 1.1 million. At 4% growth on the non-DB it is projected to be 1.162 at age 65.

If the bull run continues much longer then he will need to crystallise sooner. Fingers crossed.