USS - General discussion

Simes122

swindiff said:

It's calculated as 20x your DB annual pension plus your DB lump sum plus your DC pot, all multiplied by 0.25.

Yes, that’s what I’ve seen on here and what I discussed above.  The benefit conversion modeller shows me a different outcome.  If I put in £4000 dB pension, and £180000. By the above, 20 x 4000 = 80000.  Plus £12000 = 92000.   + 180000 = £272000 x 25% = 68000 tf ls.  The modeller shows max tax free ls of £47332.    

https://www.ussbenefitmodeller.co.uk/benefit_conversion

swindiff

That seems to be about the value of 25% of your DC pot plus your DB lump sum. Not taking into account 20x your annual pension. I have no idea why that would be the case. I have just put 4k annual pension with 180k dc pension into the modeller and I get the same sort of figures as you. Just over 49k max tax free cash.

The modeller then automatically converts the extra cash into additional annual pension. Increasing it from 4k to just over 7.3k. 

Your DC pot is very high in comparison to your DB pension. I don't know if that is relevant at all?

NTFI19081

Hi Fellow USSers, I beginning to wonder if I am doing the right thing. I have a 23k p.a. DB pot and 53k DC Pot. I have another 60k in a SIPP - where I stick most of my rather aggressive pension saving every month. Hoping to end up with 200-250k DCs total. Should I be putting the SIPP savings into USS DC ? i.e. it appears that I can get more TFLS this way? cheers

swindiff

I would say almost certainly you would be better off putting it in the USS investment builder. As you say you can get more tax free cash as it is valued against your DB pension as well as your DC and if your employer supports it you can use salary sacrifice meaning as well as saving paying tax on your contributions you also save on national insurance. The USS investment builder is also fully subsidised by the employer so you pay no fees on your DC pension.

uss_tish

agree with swindiff, advice I received many years ago was to put any extra cash we had into my Income builder (DC) in USS rather than another package. You also have flexibility to set your own level of investment risk for the DC pot or, leave to USS to do it for you.

MPLMPL

Simes122 said:

swindiff said:

It's calculated as 20x your DB annual pension plus your DB lump sum plus your DC pot, all multiplied by 0.25.

Yes, that’s what I’ve seen on here and what I discussed above.  The benefit conversion modeller shows me a different outcome.  If I put in £4000 dB pension, and £180000. By the above, 20 x 4000 = 80000.  Plus £12000 = 92000.   + 180000 = £272000 x 25% = 68000 tf ls.  The modeller shows max tax free ls of £47332.    

https://www.ussbenefitmodeller.co.uk/benefit_conversion

If you want to calculate the maximum tax-free you can take from the investment builder when linked to the DB income builder, don't use the entire investment builder in the calculation, do the following. This leaves the remaining investment builder uncrystallised (and available for UFPLS or transfer out to a SIPP).

As you state, 20x DB + DB lump sum i.e. 23 x DB.
Mutliply this by 0.25.
Subtract the DB lump sum (3 X DB).
Divide this by 0.75 to give the total IB to take tax-free by this method.
Probably easier to show with your numbers:
23 x £4000 = £92000.
£92000 x 0.25 = £23000
Subtract the standard DB lump sum: £23000 - 3 x £4000 = £11000.
This is 75% of the IB that you will take by this method, so £11000 / 0.75 = £14667
This is the maximum TFLS that you can take be linking to the DB pension by this method. The remaining £165333 of your investment builder would be uncrystallised i.e. with 25% available tax-free when you decide to take it.

Using this method, for every £1000 of DB you can take £3666.67 of your investment builder entrirely tax-free. Any left over investment builder can be left uncrystallised.

When you enter £1800000 in the benefit conversion tool you are effectively asking it to commute the remainder to additional DB pension.

If you plug £4000 DB and £14667 in the modeller, you will get these numbers. If you start to increase this, it will start to commute the excess to a higher DB pension.

NTFI19081

swindiff said:

I would say almost certainly you would be better off putting it in the USS investment builder. As you say you can get more tax free cash as it is valued against your DB pension as well as your DC and if your employer supports it you can use salary sacrifice meaning as well as saving paying tax on your contributions you also save on national insurance. The USS investment builder is also fully subsidised by the employer so you pay no fees on your DC pension.

Thanks - I notice you can transfer in and so may build up my SIPP for a bit longer and then transfer in. 

swindiff

I don't think transfers in benefit from the subsidised fees. You will also be missing out on national insurance relief. Assuming you can contribute using salary sacrifice.

NTFI19081

Ah OK, I like to take it month by month rather than doing it via salary - but guess lump sums via that route is the way to go

swindiff

I can change my contributions as often as I like.