USS - General discussion

PJM_62

I did same for my Flexible Retirement application back in March.
Used part 8 to be explicit about what I did, and didn't, want.

NickBFS

Tarama said:

Hello 

I have a question that I don't think has already been covered in this thread.

This is for a friend who is currently working PT in a HEI for the last 2 years (retired from another HEI about 4 years ago - currently  in receipt of a USS pension - about 17K pa). 

In the current PT employment my friend did not join USS but is now considering doing so.  So rejoining is possible?  Then my friend wants to stay in the scheme until retirement at 67 - 4 years away and she thinks she can leave all she accrues (DB - RIB and DC - IB) and combine this to take as drawdown. 

Many of you here know the USS rules around this and I wonder if  you could comment on the viability of this.  Is it possible - can she combine RIB and IB to take as drawdown?  Are there any pitfalls she needs to be aware of?  Anyother comments?

Many thanks 
Tarama       

Not sure whether you can re-join USS if you are already in receipt of a USS pension. I was under the impression that the two were mutually exclusive but I can't find anything on the USS website that states this clearly.

If it is possible to re-join in this situation, in any event, the RIB is a DB pension, which means that it cannot be taken as drawdown. To do this, you would need to transfer it to a scheme that allows that (in practice probably a SIPP in your friend's situation). If the amount transferred is higher than £30K, your friend would be legally required to take (expensive) independent financial advice before being able to do it (quite apart from the issue of whether it is sensible to do that in the first place, which in 99% of situations, it normally isn't).

Tarama

NickBFS said:

Tarama said:

Hello 

I have a question that I don't think has already been covered in this thread.

This is for a friend who is currently working PT in a HEI for the last 2 years (retired from another HEI about 4 years ago - currently  in receipt of a USS pension - about 17K pa). 

In the current PT employment my friend did not join USS but is now considering doing so.  So rejoining is possible?  Then my friend wants to stay in the scheme until retirement at 67 - 4 years away and she thinks she can leave all she accrues (DB - RIB and DC - IB) and combine this to take as drawdown. 

Many of you here know the USS rules around this and I wonder if  you could comment on the viability of this.  Is it possible - can she combine RIB and IB to take as drawdown?  Are there any pitfalls she needs to be aware of?  Anyother comments?

Many thanks 
Tarama       

Not sure whether you can re-join USS if you are already in receipt of a USS pension. I was under the impression that the two were mutually exclusive but I can't find anything on the USS website that states this clearly.

If it is possible to re-join in this situation, in any event, the RIB is a DB pension, which means that it cannot be taken as drawdown. To do this, you would need to transfer it to a scheme that allows that (in practice probably a SIPP in your friend's situation). If the amount transferred is higher than £30K, your friend would be legally required to take (expensive) independent financial advice before being able to do it (quite apart from the issue of whether it is sensible to do that in the first place, which in 99% of situations, it normally isn't).

Hello NickBFS

thanks for this reply - and I can confirm that you can rejoin USS if you are in receipt of a USS pension.  I have already done this.

I know the RIB is the DB pension but my friend seems to think this can all be combined with the IB - DC pension and used as drawdown. So this is not possible unless you transfer to say a SIPP and then if this is £30K plus she  needs financial advice.

So it seems that if my friend does rejoin USS - the options are as above or the normal route take the RIB pension and save into the IB whatever % she chooses. 

Or does anyone have any other insight into any other optins.

thanks      

FIREmenow

Tarama said:

Hello 

I have a question that I don't think has already been covered in this thread.

This is for a friend who is currently working PT in a HEI for the last 2 years (retired from another HEI about 4 years ago - currently  in receipt of a USS pension - about 17K pa). 

In the current PT employment my friend did not join USS but is now considering doing so.  So rejoining is possible?  Then my friend wants to stay in the scheme until retirement at 67 - 4 years away and she thinks she can leave all she accrues (DB - RIB and DC - IB) and combine this to take as drawdown. 

Many of you here know the USS rules around this and I wonder if  you could comment on the viability of this.  Is it possible - can she combine RIB and IB to take as drawdown?  Are there any pitfalls she needs to be aware of?  Anyother comments?

Many thanks 
Tarama       

I found this on the retired FAQ page, so they should probably ask their employer:

What if I want to carry on working after I retire? 
You won’t be classed as retired if you intend to start another role in which you can build a USS pension (with either your current or a new employer). But if you’re retired and then offered another role, your employer may need to automatically enrol you into a pension scheme. You’ll need to speak to your employer about whether you can re-join USS.

Please note there are certain factors which will affect your pension if you retired due to ill health, but then start working again. Take a look at ill health retirement to find out more.

-----------

I'm not fluent in legalese, but the scheme rules seem to also indicate that due to the right to opt into a pension, a retirer can become a member again. 

In other DB pensions, abatement is an issue when taking up pensionable work again whilst receiving pension, but not sure if it applies in USS.

If it is possible to pay in again, I'd also want to be clear what happens upon death of the member if they are both an active and retired member, as death-in-service and death-in-retirement grants/benefits are different. They might each be calculated on the separate portions, but if one cancelled out the other for some reason and meant that a surviving spouse/dependent would be in a much worse position, that could be a reason not to rejoin. This is all just my musings though so best for them to ask their employer in the first instance. 

As said above, it is very difficult (but not completely impossible) to transfer a DB scheme into a DC scheme that allows drawdown. If this process requires independent financial advice there is also the cost of that to factor in.

If the DB is small USS might offer a trivial commutation figure - basically offering a single lump sum instead of the annual pension. 

Tarama

FIREmenow said:

Tarama said:

Hello 

I have a question that I don't think has already been covered in this thread.

This is for a friend who is currently working PT in a HEI for the last 2 years (retired from another HEI about 4 years ago - currently  in receipt of a USS pension - about 17K pa). 

In the current PT employment my friend did not join USS but is now considering doing so.  So rejoining is possible?  Then my friend wants to stay in the scheme until retirement at 67 - 4 years away and she thinks she can leave all she accrues (DB - RIB and DC - IB) and combine this to take as drawdown. 

Many of you here know the USS rules around this and I wonder if  you could comment on the viability of this.  Is it possible - can she combine RIB and IB to take as drawdown?  Are there any pitfalls she needs to be aware of?  Anyother comments?

Many thanks 
Tarama       

I found this on the retired FAQ page, so they should probably ask their employer:

What if I want to carry on working after I retire? 
You won’t be classed as retired if you intend to start another role in which you can build a USS pension (with either your current or a new employer). But if you’re retired and then offered another role, your employer may need to automatically enrol you into a pension scheme. You’ll need to speak to your employer about whether you can re-join USS.

Please note there are certain factors which will affect your pension if you retired due to ill health, but then start working again. Take a look at ill health retirement to find out more.

-----------

I'm not fluent in legalese, but the scheme rules seem to also indicate that due to the right to opt into a pension, a retirer can become a member again. 

In other DB pensions, abatement is an issue when taking up pensionable work again whilst receiving pension, but not sure if it applies in USS.

If it is possible to pay in again, I'd also want to be clear what happens upon death of the member if they are both an active and retired member, as death-in-service and death-in-retirement grants/benefits are different. They might each be calculated on the separate portions, but if one cancelled out the other for some reason and meant that a surviving spouse/dependent would be in a much worse position, that could be a reason not to rejoin. This is all just my musings though so best for them to ask their employer in the first instance. 

As said above, it is very difficult (but not completely impossible) to transfer a DB scheme into a DC scheme that allows drawdown. If this process requires independent financial advice there is also the cost of that to factor in.

If the DB is small USS might offer a trivial commutation figure - basically offering a single lump sum instead of the annual pension. 

Thank you FIREmenow

this brings up other issues to consider  - which rule applies re the death in service vs the death in retirement - that can hopefully be answered by USS. 

My friend wants a lump sum -  not to take the RIB which will be small - it will only straddle a few years.  Your last point is what she is hoping for but I know the commutation figure will be small.

Things to consider and again thanks
  

NickBFS

AIUI, trivial commutation is only allowed if the value of the sum total of all your pensions is under £ 30K, which would not be the case here since an annual pension of £17.5K vastly exceeds that.
What I understand might be possible is commutation under the small pots rule, if the value of the pension at issue (rather than the totality of pension rights of the individual concerned) is under £10K. Back of fag packet calculations suggest an annual pension of circa £430 max. With contribution over 4 years, this would seem to suggest a maximum average annual salary around £8000.
This is not an area I am very knowledgeable in so I will let others who know more to comment on this. Your friend may also want to speak to USS direct to ask them whether, and if so under which conditions/thresholds, small RB pensions can be commuted to cash.

FIREmenow

In the scheme rules I think the annual value needs to be quite small for trivial commutation, less than £300 (including lump sum) so unless she is very part-time, or close to minimum wage it might not be low enough. This is something that the scheme chooses to offer and they will set a value and make an offer. I'm not sure whether that is then taxable. Edited to add. If they treat the pension in payment and the new membership as one combined total then there would be no trivial commutation just a slightly bigger pension than she already gets. She would really need to know if a break in service between the two memberships keeps them separate.

The other kind of commutation that you are referring to, where you convert DB into tax-free lump sum can only be done up to a maximum of 25% of the combined pension value, so would not convert all of it into cash.

Knowing the reason your friend doesn't want a DB would be helpful as it is generally a very good deal. Does her employer offer a different pension she is eligible for?

Tarama

NickBFS said:

AIUI, trivial commutation is only allowed if the value of the sum total of all your pensions is under £ 30K, which would not be the case here since an annual pension of £17.5K vastly exceeds that.
What I understand might be possible is commutation under the small pots rule, if the value of the pension at issue (rather than the totality of pension rights of the individual concerned) is under £10K. Back of fag packet calculations suggest an annual pension of circa £430 max. With contribution over 4 years, this would seem to suggest a maximum average annual salary around £8000.
This is not an area I am very knowledgeable in so I will let others who know more to comment on this. Your friend may also want to speak to USS direct to ask them whether, and if so under which conditions/thresholds, small RB pensions can be commuted to cash.

Hello NickBFS

I will feed this back to my friend - it is all so complex -  thanks. 

Tarama

FIREmenow said:

In the scheme rules I think the annual value needs to be quite small for trivial commutation, less than £300 (including lump sum) so unless she is very part-time, or close to minimum wage it might not be low enough. This is something that the scheme chooses to offer and they will set a value and make an offer. I'm not sure whether that is then taxable. Edited to add. If they treat the pension in payment and the new membership as one combined total then there would be no trivial commutation just a slightly bigger pension than she already gets. She would really need to know if a break in service between the two memberships keeps them separate.

The other kind of commutation that you are referring to, where you convert DB into tax-free lump sum can only be done up to a maximum of 25% of the combined pension value, so would not convert all of it into cash.

Knowing the reason your friend doesn't want a DB would be helpful as it is generally a very good deal. Does her employer offer a different pension she is eligible for?

Hello FIREmenow 

I think the break is service does treate both pensions as separate (I am in this situation and mine are treated as separate).

I think my friend just wants to maximise getting a cash sum.  She is not really interested in gaining additional DB - RIB.  I think it is a good deal and I am currently in USS and maximising IB contributions.     

swindiff

I have just checked the modeller, as I do every now and then.  My annual pension has increased from the age of 61 by about £700.  Any idea why this would be the case?  I probably last checked it a month or so ago.

I am wondering have they corrected it to use the current ERF, and will then re-adjust it again in October?