Maximising USS pension

Silvertabby

Further to swindiff's answer don't forget to factor in the commutation rate.

In the case of the USS, this appears to be age related and more generous than the standard 1:12 used by the public sector but still needs to be taken into account before making a final decision.

Does the USS member website have a commutation modeller?  If so, you should be able to pop in the figures (and age) to see how much annual pension would be given up in order to obtain the maximum tax free lump sum.

swindiff

For me its round the other way.  My DB lump sum and DC pot combined will be too large to all fall within the 25% tax free lump sum, so I will be reverse commuting some of it to increase my DB pension.  Unfortunately I will be getting nowhere near 1:12 reverse commutation rate lol

PJM_62

My figures will be approx 7.5k (+22k) for the DB , and hopefully a 130k DC pot.  I think that works out at 75k TFLS. 
So if I dont use any DC to buy more pension, how much of the DC is left after the TFLS?
I read somewhere that the DC Inv Bldr commutation rate is about 50.  So 50k needed to buy 1k extra pension ?  If I'm correct , that doesnt sound like something I'd go for.

swindiff

(7.5 x 20) + (7.5 x 3) + 130 = £302.5k value for TFLS calculation purposes
25% of £302.5K = £76,625 TFLS
22.5 + 130 = £152.5k  (DB lump sum + DC pot)
152.5 - 76.625 = £75,875 left in DC pot.

swindiff

I don't think you will actually know the commutation factor until you are ready to retire , it depends on many factors.  The modeller was showing me a reverse commutation of about 24 until the pension age changed to 66 this year, now its up in the high 30's.  At 24 I would probably go for it, but probably not at nearly 40.  It seems to change considerably depending on how much you want to reverse commute.

PJM_62

swindiff said:

I don't think you will actually know the commutation factor until you are ready to retire , it depends on many factors.  The modeller was showing me a reverse commutation of about 24 until the pension age changed to 66 this year, now its up in the high 30's.  At 24 I would probably go for it, but probably not at nearly 40.  It seems to change considerably depending on how much you want to reverse commute.

Thanks for confirming my TFLS calcs.  Thats really put a smile on my face on this grey and rainy day.
The commutation rates you mention , are they definitely for the DC pot?  I read somewhere that for my case - male mid-50s - rates are about 20 for DB and 40/50 for DC.   Not sure why there would be such a big difference ?

swindiff

The modeller does not actually differentiate between the DB lump sum or DC pot when entering the figures so no idea on that one, sorry.

swindiff

Something else I am not sure of is can you keep your DC pot going once you have retired, do USS offer a drawdown option?

PJM_62

I'm assuming that once youve taken your 25% TFLS, any DC that you dont convert (I wont be if rate is 50) , can be drawn down as and when you want.
But, being as you'd have already had the 25% TFLS, no drawdowns will have a TF element, like UFPLS would.
I dont see this scenario in any of the USS docs.
@ussdave are you able to advise on this ?

AlanP_2

With the LGPS yopu have to transfer out of the DC scheme associated with the main DB pension if there is any residual after TFLS and you don't wnat to buy additional DB.

Once transferred it is just a crystalised DC pot.