3 pensions, not much of a clue what to do

Bunny58

Hello,

I am a 58 year old woman, married but husband is in a care home funded by his own state pension, half his very small private pension and council pays the rest as he has no savings.

I have a child of 18 currently at secondary school, going to University this Autumn for a 4 year course. I will need to declare my Gross Income each year for the student finance tuition and maintenance loans and the more I earn the less the maintenance loan so I will need to make up the difference directly and extra support for living expenses on top of the student loans.

My mortgage will be paid off when I’m 60. 

I have 3 pensions, two are Defined Benefit, Final Salary Schemes and the other is a group personal pension, two from the same employer where I still work and I intend to carry on for a while, I can take the frozen DB pension and continue contributing to the DC one. My state pension will be at age 67. The current employer’s Final Salary DB pension closed in 2019, so I am thinking to take that this year or next year at the age of 59 or 60, and have received 2 forecasts with differing lump sums and pensions:

2020 forecast

Option 1

Annual pension £7172.80, tax free lump sum £22197.96

Option 2

Annual pension £6215.61, tax free lump sum £41437.42

2021 forecast

Option 1

Annual pension £7550.32, tax free lump sum £22650.98

Option 2

Annual pension £6496.34, tax free lump sum £43308.95

I can also do something else, in between the above, with this pension, even no lump sum and a higher pension although I don’t have the figures for that yet.

My current yearly income is around £37k. I have 2 jobs. I have about £20k in savings for a rainy day, I don’t have any debt apart from the small mortgage. I want to be able to support my child through University and after, and be able to travel a little. In the future I would probably want to sell my home and downsize, giving me a lump sum and possibly a house deposit for my child when it’s time.

So I don’t know what’s the best way forward, a higher lump sum and smaller pension, or smaller lump sum and bigger pension. If I don’t take it at 59, I will lose a year’s pension income, but perhaps there’s a wider picture I’m not seeing.

My current employee pension plan with Aegon, my employer pays in around £369.09 per month and I pay £31.64, and a lump sum of £5775 was paid in when it started, as a sweetener for the closing of the Final Salary scheme. It’s my intention to work there until I am 67 although that may change if my circumstances were to change, but assumes a final DC pot of around £40-45k.

The other Final Salary 1/80th small pension, which I could take aged 60, with a projected lump sum of £6444 and an annual pension of £2148 and I assume that can also be adjusted to higher or lower the lump sum and pension payments..

Because of all of the above I’m very risk averse so any lump sum would probably just remain in my ISA.

I do have access through work to an Independent Financial Advisor but he seems loathe to suggest what’s best in individual circumstances, beyond pay everything I can into my new pension.. 

I would love to have the benefit of any of your advice or experience, and thank you. I’m glad to have found this website and learning a lot reading the other pension posts.

Bunny

Albermarle

Do you have to take your DB pensions now or soon, is there any possibility to leave them until later ?
Not saying that is the right thing to do but would fill out the picture.
I do have access through work to an Independent Financial Advisor but he seems loathe to suggest what’s best in individual circumstances, beyond pay everything I can into my new pension.. 
Probably this is not bad advice from a tax/tax relief view.

Bunny58

No, I don't have to take them now, but both have no reduction from age 60, and I was thinking even at 59, an extra £6k a year wouldn't go amiss with the Uni starting this year.. I know I will have to pay tax on it..
If I have any spare cash left over at the end of the month (not often) I put it in my ISA where I can see it and access it if I need to, I'm dubious about this new DC pension having been in the DB ones all my working life until the last year or so..
Thanks Albermarle
Bunny

xylophone

Have you obtained a state pension forecast?
https://www.gov.uk/check-state-pension
If you do not take either of the DB pensions until Normal Scheme Retirement Age (60? In 2022?) thus keeping your income at £37,000, will this give your child access to more help from Student Finance?

Bunny58

My state pension at age 67 should be about 80% I think from the state pension checker when I last checked. I will.be 60 in 2021. I don't think it's much difference between 37 and 44k for the student finance amount but would need to check
Thanks xylophone.

Bunny

xylophone

My state pension at age 67 should be about 80% I think from the state pension checker when I last checked.

Have you obtained the State Pension Forecast as above? If so, what does it say?

Bunny58

Sorry xylophone, state pension forecast info,  as at last year, it will be £137.13, if I contribute another 7 years it will be £168.60.

Albermarle

state pension forecast info,  as at last year, it will be £137.13, if I contribute another 7 years it will be £168.60.

If you are going to work another 7 years then no problem . If not you should pay for extra years .

I'm dubious about this new DC pension having been in the DB ones all my working life until the last year or so..

For sure DB is better than DC , but there are still some advantages to a DC pension, such as gaining tax relief on your contributions and the employer contributions - all free money basically . Plus you can access from 55 if necessary .

extra £6k a year wouldn't go amiss with the Uni starting this year..

For sure some financial support at Uni is a good thing but £6K a year would be at the higher end and more for those at posher Unis, in expensive locations. If she goes to a Northern City or lives at home even , the costs are more manageable.

Bunny58

For sure some financial support at Uni is a good thing but £6K a year would be at the higher end and more for those at posher Unis, in expensive locations. If she goes to a Northern City or lives at home even , the costs are more manageable.

what I meant is, if I take my DB pension at 59, I will have an extra 6k (4k after tax I guess) on top of my salary, to help with uni living expenses. The maintenance loan won't even cover the accomodation never mind eating and so on.. The Uni chosen is in the South and not an option to be living at home.

If I wait until 60 or later to take the DB pension, aren't I diddling myself out of £4k every year that I don't take it? 

Bunny

xylophone

The other Final Salary 1/80th small pension, which I could take aged 60, with a projected lump sum of £6444 and an annual pension of £2148 and I assume that can also be adjusted to higher or lower the lump sum and pension payments..

What is on offer if you take this at age 58/9 to coincide with your child's going to University?

The tax free PCLS gives a handy lump sum and you could pass on the small monthly pension to him as maintenance?

You could then delay drawing your larger DB pension until Scheme NRA?

Bunny58

You could then delay drawing your larger DB pension until Scheme NRA?
See, this is where my head gets a bit befuddled, if I take it at 59, using the higher lump sum figures from each example in my original post, I get a yearly pension of £6215.62 against £6496.34, an increase of £280.73 if I wait til 60. In the lump sum, it would increase from £41437.42 to 43308.95 (£1871.53) if I waited til 60. But, by not taking it at 59, I lose a year of pension income of £6215.61.. 

I'm not sure about the small DB pension, they have only ever illustrated it for age 60, but for those amounts I could dip into my current savings for Year 1 of Uni and then replace it after age 60 when I get that about 6k lump sum rather than take a reduced pension from the small one I guess..

Bunny