Maximising USS pension

Umiamz

I'm hoping to retire in 12 months time so looking at how to maximise my USS pension until then.

I've increased my salary-sacrifice contribution to the maximum I can afford and have also just received a lump sum of £20,000 that I also want to contribute. I've also instructed USS to invest all my contributions in their cash fund. I'm not going to hit the £40,000 limit for tax relief before I retire.

With that in mind, does it matter at what point during this coming year that I contribute the £20,000 lump sum? I was thinking of sticking it in NS&I income bonds until a couple of months before I retire and contribute it then, rather than risking it in their (admittedly low-risk) cash fund.

Hope that all makes sense - happy to clarify further...

Brynsam

What's the performance of the USS cash fund been like in the last 6 months?

83705628

I don't know why you would want your whole USS investment builder in the cash fund, the interest rate on it is very probably less than NS&I Income Bonds so the only advantage you get by doing that are the tax perks.
But I can think of no reason why you couldn't add in that extra 20k as long as you don't go over any AA limits.

Umiamz

I want it in the cash fund because I want to minimise the risk of losing any of it over the next 12 months. The cash fund has risen by 0.3% over the last 6 months and NS&I are currently paying 1.16% AER. My question was really whether it matters at which point I add this £20K to USS Investment Builder so long as it's in there by the time I retire. I'd like to use some of it to increase the amount of the (Retirement Builder) pension I receive.

Brynsam

Umiamz said:

I want it in the cash fund because I want to minimise the risk of losing any of it over the next 12 months. The cash fund has risen by 0.3% over the last 6 months and NS&I are currently paying 1.16% AER. My question was really whether it matters at which point I add this £20K to USS Investment Builder so long as it's in there by the time I retire. I'd like to use some of it to increase the amount of the (Retirement Builder) pension I receive.

Haven't you answered your own question? Pay it in just before you retire - better return from NS&I in the meantime, and no risk; then a very short period of (small) risk between moving the cash to the Retirement Builder and your retirement. 

Umiamz

Brynsam said:

Umiamz said:

I want it in the cash fund because I want to minimise the risk of losing any of it over the next 12 months. The cash fund has risen by 0.3% over the last 6 months and NS&I are currently paying 1.16% AER. My question was really whether it matters at which point I add this £20K to USS Investment Builder so long as it's in there by the time I retire. I'd like to use some of it to increase the amount of the (Retirement Builder) pension I receive.

Haven't you answered your own question? Pay it in just before you retire - better return from NS&I in the meantime, and no risk; then a very short period of (small) risk between moving the cash to the Retirement Builder and your retirement. 

Thanks - just wanted to check that I hadn't missed anything obvious.

Dox

Umiamz said:

Brynsam said:

Umiamz said:

I want it in the cash fund because I want to minimise the risk of losing any of it over the next 12 months. The cash fund has risen by 0.3% over the last 6 months and NS&I are currently paying 1.16% AER. My question was really whether it matters at which point I add this £20K to USS Investment Builder so long as it's in there by the time I retire. I'd like to use some of it to increase the amount of the (Retirement Builder) pension I receive.

Haven't you answered your own question? Pay it in just before you retire - better return from NS&I in the meantime, and no risk; then a very short period of (small) risk between moving the cash to the Retirement Builder and your retirement. 

Thanks - just wanted to check that I hadn't missed anything obvious.

If your contribution isn't made until the next tax year, will your marginal rate of tax have reduced by then? If so, and you are keen to maximise tax relief as well as minimise risk, making the contribution by 5 April 2021 would seem logical.

NedS

Umiamz said:

I want it in the cash fund because I want to minimise the risk of losing any of it over the next 12 months. The cash fund has risen by 0.3% over the last 6 months and NS&I are currently paying 1.16% AER. My question was really whether it matters at which point I add this £20K to USS Investment Builder so long as it's in there by the time I retire. I'd like to use some of it to increase the amount of the (Retirement Builder) pension I receive.

You will need to have sufficient relievable earnings to cover the contribution, so depending upon your earnings and other pension contributions, you may need to give consideration as to whether you make the contribution this tax year (before April 6th, 2021) or next tax year (after April 6th, 2021).

bluenose1

Does your employer offer salary sacrifice? Mine does and I am also in USS.  If so you may want to consider increasing your contributions via your salary as you will benefit from not paying the National insurance. I would pay the max you are allowed and top up your shortfall in  income with your £20k.  
For basic rate tax payers for every £68 your salary reduces £100 will go into your pension pot.
I intend to retire in the next year myself and withdraw as much of my DC pot tax free as I can.
Even if you did pay tax on you pot then for every £68 your salary reduces you would get £85.  A return on your investment of 25%. 

Umiamz

I think I may well be retiring just before the end of the tax year, but we'll see.

Thanks to everybody who replied

PJM_62

bluenose1 said:

Does your employer offer salary sacrifice? Mine does and I am also in USS.  If so you may want to consider increasing your contributions via your salary as you will benefit from not paying the National insurance. I would pay the max you are allowed and top up your shortfall in  income with your £20k.  
For basic rate tax payers for every £68 your salary reduces £100 will go into your pension pot.
I intend to retire in the next year myself and withdraw as much of my DC pot tax free as I can.
Even if you did pay tax on you pot then for every £68 your salary reduces you would get £85.  A return on your investment of 25%. 

@bluenose1
Hi , I saw you mention this in another thread a while ago.
It was a real eye opener to me, and I'm now, during last 2 years before early retirement (56), putting as much as I can (about 2k a month) into the InvBldr DC pot via salary sacrifice.
Thanks for the tip! 👍 Its going to make a big difference to my early retirement income.
My thoughts have now turned to best approach for using DB (reduced to about 7.5k) and DC pot (about 100k) to create the income during retirement.
I'm thinking I'll convert the DB lump sum (22k) to make more DB pension (= about £800 more), and take as much as I can tax free from the DC pot and put that into my S&S ISA (also about 100k). Then each year supplement my DB with drawdown from DC + ISA. 
Any tips on that as an approach ?    Thanks in advance.