Pension income sequencing

PJM_62

thanks for all advice so far. Its got me thinking thats for sure.

PJM_62

I'm a real novice with spreadsheets.
Can anyone point me to any freely available spreadsheets or other retirement income planning software that would let me create and view different scenarios side by side?

xylophone

At 67 - full SP of 8.5k for both me and my wife

You have both checked your new state pension forecast?

https://www.gov.uk/check-state-pension

PJM_62

xylophone wrote: »

You have both checked your new state pension forecast?

Yes, have done that. Might have a couple of years to pay to make sure both at max.

Linton

Albermarle wrote: »

It is actually a 6.25% advantage for the pension e.g.
Contribute £800 to a SIPP . HMRC add £200, so you have a £1000.
Take £250 tax free then pay 20% tax on £750 . Final result £850 in your pocket : £50/£800 X 100 = 6.25%

Or 5% of your gross pension contribution. Yes, the precise numbers depend on which way round you look at things, but the general point remains the same.

PJM_62

Aiki wrote: »

When I ran my numbers for my upcoming 55th Birthday, I thought that the DC option first and leaving my DB to closer or at the non-actuarial reduction date would be better but it showed better to take the DB early. What I did was set up a speadsheet with the various options and ran different scenarios of CPI/RPI and investment performance. This included trying to pay no tax on DC in the early years by using ISA to supplement my icome needs. In my case, the 5 years of income of the DB before 60 would dominate all scenarios i could come up with. If I live to my mid to late 90's it may become a problem but I will worry about that in 40 years time. My only decision now is whether to take any lump sum from my DB. The benefits are marginal.

You will need to run your own numbers with your own assumptions to test the options. Good luck.

Could you explain a bit more about running the numbers to test ?
I get that there will various different ways to sequence and achieve the target 28k. But not sure about how to work out the effects of the different approaches to see which is best option in terms of tax paid and depletion of DC pots and ISAs.

swindiff

Linton wrote: »

Or 5% of your gross pension contribution. Yes, the precise numbers depend on which way round you look at things, but the general point remains the same.

If the AVC which the OP is talking about is the DC part of the USS pension scheme then it is way better than that. In fact it is possible to get all of the DC pot out tax free depending on how much the DB part of the pension is worth, as the value of both the DC and DB part of the pensions are calculated together when working out the 25% TFLS

PJM_62

I might be using the term AVC incorrectly? Not sure. It is the DC part of USS - 'Investment Builder'.
Until a few years back I was paying into the USS Prudential AVC scheme. That ended and the money I built up in there was transferred to the USS DC pot. I now pay extra pension payments into that DC pot.

swindiff

There are advantages to putting the money into the Investment builder. The fees are very small and in many cases no fee's at all. It all depends on how you choose to invest. The big advantage though is the Tax free lump sum. So if you had a £9k pension this is valued at 20x to calculate the lump sum, so £180k + the Lump sum of 3 times your pension you get with the DB part of the pension. So that comes out at £207k, if you then have £100k in your DC investment builder that is a total pension value of £307k. 25% of that value is £76.75k which you could take out totally tax free. The remaining £23.25k can be converted to additional pension if you wish to.

Aiki

PJM_62 wrote: »

Could you explain a bit more about running the numbers to test ?
I get that there will various different ways to sequence and achieve the target 28k. But not sure about how to work out the effects of the different approaches to see which is best option in terms of tax paid and depletion of DC pots and ISAs.

I have run your numbers in my simplistic spreadsheet, which assumes all numbers increase by same inflation/CPI number per year including your DC investment. I can't find a way to copy the spreadsheet into the post, but if you remove £10k from your DC every year for 12 years up to state pension, and your wife is the same age and pays no tax on it, at 67 you will have no DC left and £30K of your ISA's left. At 67 you have a combined income of approx £28K so you are cost neutral.