USS - General discussion

MarlowMallard

The rules say you can take your benefits earned pre-October-2011 without an early-retirement factor (ERF) if you "retire from active service from age 60 with employer consent, such consent not to be unreasonably withheld".    In practice unless you're in the middle of a crucial project I've heard consent is normally given, and if they are making you redundant they can't reasonably refuse consent if you request to retire the same day they make you redundant.  
Note it does need to be synchronised, because if you just get redundant and are not in "active service",  then come back months later and activate pension, you get an ERF before age 63.5 .  
 ( Benefits from Oct 2011 to 2020 will have an ERF factor before age 65, and after 2020 before age 66, 
  which are fixed ).   

The tricky bit however is, if you are requesting to retire then they may not be obliged to pay out the redundancy lump sum ?   Whether you can get both the redundancy payout and the no-ERF-applied at the same time is a tricky question.  If they get obstinate, you could always ask your employer "I'll take 90% of the redundancy payment if you let me retire 1 day before redundancy", and they would be nuts to refuse.  

Morgan-Green

Thanks.  They are definitely making me redundant, that's all agreed and signed off and 31/3/26 will be my final day.

Morgan-Green

MarlowMallard said:

The tricky bit however is, if you are requesting to retire then they may not be obliged to pay out the redundancy lump sum ?   Whether you can get both the redundancy payout and the no-ERF-applied at the same time is a tricky question.  If they get obstinate, you could always ask your employer "I'll take 90% of the redundancy payment if you let me retire 1 day before redundancy", and they would be nuts to refuse.  

Saw you added this extra bit

So, I assume the university have to confirm to USS their agreement to me retiring, even though they are making me redundant?  There must be a way this can be synched up?  Can I be made redundant one day and start drawing pension (with minimised reductions, I know some will apply regardless) the next?

Barralad77

Given that the University is making you redundant you can assume they consent to you finishing working for them. And as long as you are over 55 you can take your pension when you want; as you will be 60 at that point there’s no reason you can’t take your pension immediately. Indeed, if you want to maximise the advantages I’m pretty sure this is what you will need to do (i.e., not defer taking your pension, otherwise your pre-2011 contributions will be treated as having a NPA of 63.5). 

PJM_62

What are people's thoughts on doing some lump sum (on top of existing monthly) AVCs into IB pot during the months before they stop working (retire / redundancy.) (55+)
Then after leaving , and taking max tfls , drawing down the AVCs in ufpls chunks ?
(Being mindful to stay in standard rate income tax )

Is there a simple formula to show how beneficial it is (for each avc of 1k) ?

Barralad77

I think it will depend on what level of tax that extra LS would otherwise be subject to, but here’s my go.

[this assumes the LS is given up via salary sacrifice]

The £1k falls in the 40% tax band. Meaning you will save 40% (tax) + 8% NI) on that contribution. The £1k LS should cost you £520.

if you take it out very soon after, and assuming it doesn’t grow (or drop) in value, then if you’re now a lower rate tax payer you would get 85% of that £1k (i.e., £250 would be tax-free and the other £750 would be subject to 20% tax). 

In sum, for a cost of £520 you will get £850 back.

A return of £330 on your investment. Of course, the return would be lower if the LS came from your 20% tax bracket; in that case I think it would be £130.

That’s how my maths calculates this, but happy to be put right.

swindiff

NI is only 2% in the higher tax bracket.

ussdave

PJM_62 said:

What are people's thoughts on doing some lump sum (on top of existing monthly) AVCs into IB pot during the months before they stop working (retire / redundancy.) (55+)
Then after leaving , and taking max tfls , drawing down the AVCs in ufpls chunks ?
(Being mindful to stay in standard rate income tax )

Is there a simple formula to show how beneficial it is (for each avc of 1k) ?

Probably worthwhile, especially if your IB is below the max TFLS amount (still worth it even if not).  Tax breaks on the way in, less tax on the way out.  If you're SSing then I guess it's even still technically beneficial if it's 40% tax on the way out (as you'd save the 2% NI)?

PJM_62

Unfortunately 20% in , 20% out (25% tax free)   
Still worth it ?

Reason for asking is tax free savings wrappers all used up.
So where to put any redundancy / retirement tax free cash?

ussdave

Ah, so no salary sacrifice?

Probably still worth it for the effective rate of 15% tax on withdrawal.  Also, as you say, a tax wrapper.  And the 0 fees.