Big DB Multiplier

ffacoffipawb

jamesd wrote: »

If all 320k was available for exclusive use for the 399k it could still be quite attractive. But that spousal benefit is also excellent and merits careful consideration

Only mooting anyway. No way would I give up that defined benefit. It gives me a nice secure base on top of my DC pot.

See my other post about retiring early. An early retirement factor of 0.79 makes a a payback age of 88 which makes early retiring this DB pension appear to be a no brainer.

EDIT: I have another DC pot of £180,000 which I intend taking last. In fact may do nothing until I have to take the LTA hit at 75. Why take a hit earlier if I dont have to. Maybe the LTA wont exist by then. If it still does, well have to take the hit, no choice. Will probably invest very aggressively with this because if it goes "mamaria verticulus" the government shares the loss.

ukdw

ffacoffipawb wrote: »

EDIT: I have another DC pot of £180,000 which I intend taking last. In fact may do nothing until I have to take the LTA hit at 75. Why take a hit earlier if I dont have to. Maybe the LTA wont exist by then. If it still does, well have to take the hit, no choice. Will probably invest very aggressively with this because if it goes "mamaria verticulus" the government shares the loss.

An interesting dilemma about whether or not to invest aggressively or safely in the above LTA non crystallised portion of a pension, If you took the example of a 20 year investment horizon (age 55-75) of a 50:50 equities/bonds portfolio - then I wonder whether it would be better to have the likely lower growth bonds in the above LTA part - as they would likely gain less over the 20 year period and would therefore result overall in less LTA 25% tax to pay.

ffacoffipawb

ukdw wrote: »

An interesting dilemma about whether or not to invest aggressively or safely in the above LTA non crystallised portion of a pension, If you took the example of a 20 year investment horizon (age 55-75) of a 50:50 equities/bonds portfolio - then I wonder whether it would be better to have the likely lower growth bonds in the above LTA part - as they would likely gain less over the 20 year period and would therefore result overall in less LTA 25% tax to pay.

Keeping 75% of X is better than 75% of Y if X > Y

Better chance of a bigger X with aggressive investing.

If it goes wrong, the Government takes a share of the loss.

shinytop

I was going to crystallise all of it up to LTA (which in my case is pretty much all of it) and then try and get as much as possible out of the pension into ISAs without paying HRT and use that for the high growth stuff. The lower growth funds would stay in the pension until I could get them out. If you're way over LTA from the start that wouldn't work as well.

ffacoffipawb

shinytop wrote: »

I was going to crystallise all of it up to LTA (which in my case is pretty much all of it) and then try and get as much as possible out of the pension into ISAs without paying HRT and use that for the high growth stuff. The lower growth funds would stay in the pension until I could get them out. If you're way over LTA from the start that wouldn't work as well.

I have crystallised 70% of LTA. This leaves 30%.

The pension referred to here would take another 18%. Now 12% left.

My other DB which is smaller is probably 8% of LTA but not available until 60 due to the fact it us mostly post 88 gmp with 7.5% revaluation.

This leaves me with about 4% LTA.

My uncrystallised DC funds are currently £170,000. Deduct £20,000 for my remaining 2 small pots (ahem) leaves £150,000 so I am over LTA by about 10%, not hugely really.

Thrugelmir

ffacoffipawb wrote: »

Makes less sense to compare a known CETV now with an unknown projected pension to a future date.

What's the guaranteed pension at NRA? Only difference will be inflation.

CETV may drop the day after you invest it. Going to happen to a number of people one day. Given the only option is equities. Little point in investing in high quality bonds. As they'll underperform the growth in the DB for the foreseeable future.

Brynsam

ffacoffipawb wrote: »

1 yes, spouse is £7,000 regardless of option taken. Survivors' pensions are the same whether or not you take tax free cash - it is only your pension you swap (commute) for a tax free lump sum, unless you are able to commute the whole pension, in which case all benefits are exchanged for cash, including spousal/child pensions
2 yes, boring office job
3 yes, GMP is about 15% of the total, 4.5% fixed rate revaluation
4 yes, RPI linkage in deferment and payment, GMP different obviously

Full house, lol

Seems strange that PCLS is only £48,000 whereas 25% of the transfer value is about £75,000. Seems inconsistent. Schemes often have a difference between the factors used for commutation, and how transfer values are calculated. This has been highlighted by the increased interest in taking a transfer value. Another possibility is that the rules of the scheme do not allow you to take maximum tax free cash (maximum as in HMRC rules, which override scheme rules), which would certainly create a difference.

Please see above.

ffacoffipawb

Thrugelmir wrote: »

What's the guaranteed pension at NRA? Only difference will be inflation.

CETV may drop the day after you invest it. Going to happen to a number of people one day. Given the only option is equities. Little point in investing in high quality bonds. As they'll underperform the growth in the DB for the foreseeable future.

No intention of taking the transfer value.

The PCLS seems poor value when considering current annuity rates to purchase the pension lost.

Look like the first option of the £9,200 early retirement pension is the way to go. I will get more money out of the scheme by doing this than waiting to age 62 (total payouts from the latter don't exceed the early option until I am 88 and more money at a younger age seems better).

I can then take £15,000 p.a. from my £550,000 drawdown pot (less than 3%) without running out of money.

Another defined benefit is available from 60 which is mostly GMP (so no earlier option there). Will be about £4,000.

This all looks eminently doable if my job becomes too much stress.

Taking the £9,200 pension regardless. Only drawdown if I leave my job. This looks more tempting by the day. Even going to a 2 day week hasn't helped me unfortunately.

My current job pension of £150,000 uncrystallised will take me over LTA. I will just park that until age 75 I guess.

First world problems admittedly.

ffacoffipawb

ffacoffipawb wrote: »

No intention of taking the transfer value.

The PCLS seems poor value when considering current annuity rates to purchase the pension lost.

Look like the first option of the £9,200 early retirement pension is the way to go. I will get more money out of the scheme by doing this than waiting to age 62 (total payouts from the latter don't exceed the early option until I am 88 and more money at a younger age seems better).

I can then take £15,000 p.a. from my £550,000 drawdown pot (less than 3%) without running out of money.

Another defined benefit is available from 60 which is mostly GMP (so no earlier option there). Will be about £4,000.

This all looks eminently doable if my job becomes too much stress.

Taking the £9,200 pension regardless. Only drawdown if I leave my job. This looks more tempting by the day. Even going to a 2 day week hasn't helped me unfortunately.

My current job pension of £150,000 uncrystallised will take me over LTA. I will just park that until age 75 I guess.

First world problems admittedly.

Still in a quandary over this.

Age 55, give up a pension of £1,960 gross, index linked up to 5% pa, for a PCLS of £48,300.

Commutation factor of 24 or, allowing for the fact the pension is taxed but the PCLS is not, approx 30.

I know the PCLS is poor compared to annuity rates (value of annuity given up is nearer £100k) but it still seems reasonable to take it.

If inflation is nil, it is 30 years' payments. I doubt I will live past 80 if I am realistic, based on family longevity, or lack thereof. If I can invest at 3.5% real rate of return it looks a no brainer to take the PCLS.

I don't actually NEED the PCLS, I have about £50k left over from the PCLS from the SIPP I crystallised last month. The aim is to get the most value to me of the proceeds of the scheme on offer.

What would you do?

jamesd

Wish that I didn't have a health restriction on how long I'd personally see the higher income. Then take the lump sum to use for drawdown in the younger years when more active. You don't seem short of guaranteed income for life and nor does your potential survivor.