Thanks everyone! (I'm almost retired)

garmeg

zagfles said:

Could look at taking the DB pension early, if the reduction factor is reasonable, as the amount crystallising is 20x the pension starting amount with no account taken of age at crystallisation. If you make good use of CGT and dividend allowances there shouldn't be too much tax even on a six figure unwrapped investment, particularly if you have a spouse whose allowances you can use and ISA up as fast as possible. Likely to be less than LTA tax. But also look into inheritance tax implications etc. 

Also if his DC pension has increased by 20% from £840k then that would be all the LTA used up just on that.

May as well crystallise the lot and take the small DB early as well.

randompenitent

Thanks @zagfles. I've not looked at the early DB option - that's interesting; I'll have to see what USS offers.

Inheritance tax isn't a major concern for us as we don't have dependents.  

There certainly are options for taking the PCLS and doing creative things with it and your post highlights that it is something I should investigate further.  Some of the simple ways of sharing allowances don't work easily for us as my spouse remains employed and paid well enough to be able to stuff money into her own ISA each year, but you're right that I need to get my head around CGT, and perhaps even look at more adventurous options such as VCTs.

garmeg

randompenitent said:

Thanks @zagfles. I've not looked at the early DB option - that's interesting; I'll have to see what USS offers.

Inheritance tax isn't a major concern for us as we don't have dependents.  

There certainly are options for taking the PCLS and doing creative things with it and your post highlights that it is something I should investigate further.  Some of the simple ways of sharing allowances don't work easily for us as my spouse remains employed and paid well enough to be able to stuff money into her own ISA each year, but you're right that I need to get my head around CGT, and perhaps even look at more adventurous options such as VCTs.

I hit the LTA at 55.

I took the DB pension early with actuarial reduction. Taken first so no LTA charge hit here.
I then crystallised up to the remaining LTA in my SIPP taking PCLS for investment in ISA and GIA.
The excess over LTA is uncrystallised so that is just being left as it is for now. Hoping for LTA removal - pigs might fly!

cfw1994

randompenitent said:

cfw1994 said:

Have you taken steps to mitigate LTA.....& how do you plan to manage the drawdown phase of your life (now the accumulation phase draws to a close!)?    Use an IFA, or just manage things as you have done thus far?
(only asking as I am about 4 months behind you with similar things....always interesting to hear others perspectives!!)
Good luck!

Thanks.

I'm now in the position that it looks very likely that I will breach the LTA when I reach 65 (I'm 59 now), at the point that my small DB pension starts payment.

My research so far seems to indicate that there's no magic wand that will abolish the LTA penalty and that the most obvious mitigation approaches, like crystallising everything now and withdrawing 25% PCLS, would leave me with a new problem, namely figuring out how to invest a six figure sum in a tax-efficient way.

I'll spend some more time reading and investigating and do some modelling with spreadsheets to get a feel for the numbers and what happens at the various BCEs.  No plans to engage an IFA yet, but I'll have lots of time to think about all of this next month.  Worst case, it's a nice problem to have, so I'm not going to lose sleep. 

None of us know what might happen in future.....
But on the topic of "figuring out how to invest a six figure sum in a tax-efficient way" - I crystallised enough around March last year so that me and SWMBO were able to max out both our ISAs either side of the tax year end - that is 80k of opportunity that is easily done....
You are in a very decent position, as you know: enjoy the time you have.   
Start by staring out of the window like many of us are doing during this crazy pandemic!!

randompenitent

garmeg said:

Also if his DC pension has increased by 20% from £840k then that would be all the LTA used up just on that.

May as well crystallise the lot and take the small DB early as well.

I'm within about £10K of the LTA today, so you're correct that I would consume (almost) all of the LTA if I crystallised today. 

randompenitent

Wentthedaywell? said:

Congratulations Random - I hope you have a long and happy one!
I'll probably go myself this year, but I think the psychological barrier is harder than the financial one.

I must say, I've learned more about pensions etc on these forums than I ever did through work. There are some excellent and helpful contributors here.

True - the psychological barrier is a bigger one than I think I wanted to admit, even to myself.  I think it is particularly difficult if you generally enjoy your work, get paid well, and are what your partner describes as a "workaholic."  I'm sure it's much easier if you're in a job that you don't enjoy.  The thing to remember is that there are other things in life and your time is very finite.

I also agree that the contributions here have been great. I don't think it's an exaggeration to say they have been life changing. I'm much better informed than I was two years ago and this forum is a great counterweight to the toxic waste of some social media. I hope to contribute back with some insights from my own experience, always assuming I have any. 

SMcGill

On the ERF for USS here’s a useful link someone in the forum posted on a thread I started https://www.uss.co.uk/-/media/project/ussmainsite/files/financial-advisers/mfuss-for-ifa.pdf?rev=e83c6925f0d54db9aa15251679cc5626 Any service you had before 2011 has a NPA of 60. Any after that it’s 65 so if you have a mix of the two periods as I do then just that later part would carry an ERF of 0.84.

shinytop

randompenitent said:

garmeg said:

Also if his DC pension has increased by 20% from £840k then that would be all the LTA used up just on that.

May as well crystallise the lot and take the small DB early as well.

I'm within about £10K of the LTA today, so you're correct that I would consume (almost) all of the LTA if I crystallised today. 

It's definitely worth looking at how LTA is applied to DB pensions.  I was right at LTA overall and I concluded I'd be better taking the DB first and slightly early to make sure sure it did not get hit.  With DB, if you are over, I believe any LTA tax applies when you take it but with DC you can mess around with crystallisations and income put it off to some extent till the BCE at 75. 

randompenitent

SMcGill said:

On the ERF for USS here’s a useful link someone in the forum posted on a thread I started https://www.uss.co.uk/-/media/project/ussmainsite/files/financial-advisers/mfuss-for-ifa.pdf?rev=e83c6925f0d54db9aa15251679cc5626 Any service you had before 2011 has a NPA of 60. Any after that it’s 65 so if you have a mix of the two periods as I do then just that later part would carry an ERF of 0.84.

Hang on. 

I’m a deferred USS member with service from 1987 to 1997, so does this mean I can take my pension at 60? Really? 

TcpnT

I was in a deferred scheme from 91-01. It was only after I retired in 2017 that I started asking more detailed questions of the scheme administrators and it eventually came out that I could take the pre 97 benefits at age 60 rather than 65 without reduction due to the equalisation ruling. It was like getting blood out of a stone though. All scheme paperwork referred to retirement at 65 as it had been originally and the members had never been informed of the change. There will still be an Early retirement factor applied to the 97-01 component but the net result is a considerable unexpected benefit. I will be 60 this year and have not yet decided whether to start drawing the pension. If I leave it till after 60 the 91-97 portion will have a late retirement uplift applied. I have no idea how widespread this is but but I have not heard much mention of it.